Whipsaw Wednesday

The Wednesday before options expiration is usually the most volatile trading session of the entire month. This is a time when the institutional traders will try and shake out most of the small retail options traders that have positions in the popular leading stocks. Look at the action in stocks such as NetFlix Inc. (NASDAQ:NFLX), and Apple Inc. (NASDAQ:AAPL) yesterday and today. These stocks have traded all over the map today. Please understand that most small options traders never exercise their options positions. They simply look to close out their positions for the premium gained or loss before the option expires.

Yes, there are major problems going on in Japan today that are very serious, however, the rumors and the news stories seem to get over exaggerated during the week leading up to options expiration. This is a time to trade the best chart pattern setups and to follow the charts. If the action becomes too volatile or erratic for traders they can simply stay on the sidelines and wait for better chart setups. Traders and investors do not have to be in the market during every minute of the day or week. This type of action today is exactly why we call this day of the month, Whipsaw Wednesday.

About Nicholas Santiago 575 Articles

Affiliation: InTheMoneyStocks.com

Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets.

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