arthur
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 Posted: Sun Dec 12, 2004 7:50 am Post subject: Trading SPX options during expiration week |
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SPX Dec options during week of expiration:
The SPX Dec options will have huge leverage next week, particularly near the end of the week, because of high strike prices and lower time values. SPX may continue the 1,173 to 1,192 range, although SPX may fall lower to the 1,160s or rise higher to near 1,200 (double-top). On Fri, SPX rose to 1,191 1/2 and closed at 1,188, even though oil prices fell sharply again. Dec out-of-the money options can be traded earlier in the week, because intrinsic value becomes more important closer to expiration. Nonetheless, it's important to buy options that can be expected to finish in-the-money. It's also important to compare Dec strike prices to estimate gains or losses. For example, on Fri, the SPX Dec 1,180 puts closed at 3.70 and the Dec 1,190 puts closed at 7.50. So, if SPX fell 10 points quickly, the Dec 1,180 puts would double. However, the Dec 1,180 puts may open lower Mon on decayed time value. Also, if SPX opens high, e.g. at 1,191, then the puts will be even lower.
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