Page 489 - THE MARKET WHISPERER

THE MARKET WHISPERER 48 5

Now let’s look a little further:
Expiration Day Five-Minute Candles for Legg Mason, LM

As you see, the last trade on expiration day was executed at thirty-two
dollars. [1]. Now, pay attention to the thirty-two dollar line running across
the chart. LM is drawn to this price already at the start of the day, and
all it has to do once it reaches thirty-two dollars is to consolidate above
or below this figure until the day ends at thirty-two dollars [1]. The pros
know exactly where they need to bring the price, and that’s where you will

find it.

SMART Because the options writers want to profit on expiration day,
MONEY they will try to shift the stock price on that day close to the
strike price of the largest open position of options.

In summary, if you insist on trading in stocks on expiration day, first

check the price their options were sold at. If you wanted to short LM based
on your conclusion that it would drop to below thirty-two dollars, you need
to understand that your chance of success is almost nil. A more reasonable

conclusion is that the stock will close at precisely the price for which the

greatest number of options were written, and that is the price at which…

yes, only the pros profit.