Daily Options Report

I try to have a mix of positions. By that I mean, don't just short put spreads or calls spreads or go long calendars or whatever in every single name. So as such, as expiration nears, I'm long near money strikes in some names, short others.

And clearly, you have to manage the positions in different ways as it's unrealistic that all your long gamma spots fly all over the place while your shorts nestle peacefully at strike.

So going in yesterday I had 2 names where I owned near money gamma (SSO and ERX) and then a 3rd that came into play thanks to the strength of the day (FAS). On the flip side, I had 2 with short strikes in play (MA and FSLR).

Long story short, when the day trends, it's tough to not sell the long gamma names too early. But by the same token, I bought stock in my gamma shorts early enough, so net-net kind of a wash.

But if I read my own book (released soon), I would have done better (Shameless Plug Alert!).

Expiration week tends to see *trend* days to a greater extent than a normal day. By that I mean, you'll tend to see more "high and last" or "low and last" sort of days. It's pretty intuitive why that happens. If we start to move, guess who's forced to scramble? It's the options shorts seeing stocks bust thru strikes and on the margins they'll extend moves.

And not only that, but you also see trends continue into the next session with greater probability. The day before expiration (today) and Expiration day itself show the 3rd and 4th most positive correlation to the previous day when i stack them up against every other day in the expiration cycle. In addiction, they form the strongest 2 day positive correlation combo of the cycle.

So while these are all just probabilities and far from guarantees, bottom line is you want to exert patience on expiration week.