Expiring Options Close The Week On An Up Note

There was no economic news on Friday. Thursday had heavy gains on heavy volume. Futures and stock options expired on Friday with a ton of call options being exchanged for the underlying stock. So, is now the time to go long? Almost, let's get a feel for momentum of the broad market on Monday. Click here to get today's free options advice; have A.J. explain option trading to you in everyday language.

Hey trading team,

This is A.J. on Sunday, November 20th with your Trading Trainer web log. We are your home of market insights for the serious options trader. This web log will cover the events in the market from this past Friday and last week as well as prepare you for watching the market tomorrow and for the week to come.

This past Friday we ended a bullish week on a high. Not only did price close higher but volume was high as well.

So what happened? I warned of price stagnation or even profit taking. What was I off about?

Well, my thoughts were based on the lack of economic news combined with the large heavy volume gains of Thursday. That usually means the market is due for some gain digestion.

So what happened Friday? Friday, we had stock and futures options expiring. Obviously, a lot of call options were cashed in for underlying stock. All on one day, a bunch of stock was bought. It is almost as if an institutional trader made a move.

What does Friday’s reaction to options expiring say about investor sentiment? Well, it says investor sentiment is bullish. That’s powerful team. To follow a heavy up day with validation that investor’s sentiment is bullish. That’s powerful team.

My Techne January 55 Calls closed up with a bid price of $2.20 per option. I’m drawn down by 63% into my initial investment after 45 days. My Southwestern Energy December 35 Calls closed down with a bid price of $2.10 per option. I’m drawn down by 47% into my initial investment after 16 days. My Phelps Dodge January 125 calls closed up with a bid price of $11.70 per option. My return on invested capital is 46% after 2 days.

Here are my recommendations team… Monday is a new week. We made some major bullish gains this past week on heavy volume and we haven’t taken the time to digest these gains. It may indeed be that digestion is not necessary. But, I personally am gun shy. Indeed, we are moving into a holiday week. So, there is a high likelihood that due to vacation and do to a probably slow down, profit taking could bring prices down again or leave them flat.

Monday will be a good indicator. So I will be watch Monday’s price movement and letting momentum guide me through Tuesday and Wednesday.

Okay, team. I'm done.

Till tomorrow, happy market watching, trading and money making. Trading Trainer is here helping you create your dream lifestyle.

Best regards always,
A.J.

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