What_is_option_pinning_or_pinning_the_stock

What Is Option Pinning or Pinning The Stock?

I have been often asked what is “option pinning” or “pinning the stock“.

In the video below I go over two examples of two stocks that “pinned” the option strike with the most open interest on options expiration.

Usually pin risk starts to happen the week of that month’s option expiration. During that week of expiration, there are conversions, unravelling and rolling of option positions that are in play by the bigger players.

The tendency of stocks “pinning” a certain strike, deals with the theory of “Max Pain” and what some think a self-fulfilling prophecy. Max Pain is the theory of the strike with the greatest open interest (calls + puts) is where most of the retail traders will be wrong.

Since most retail traders buy from a market maker, the market maker hedges the trade with stock, which is called “delta neutral“. When options come into expiration those market makers buy and sell stock to pin that strike and take in the premium sold.

With sticking to that same theory, many traders understand this theory like technical levels such as support and resistance. With many looking at the same thing, this becomes self-fulfilling.

If you are looking for more information related to option trading, check out our “Basic Options Trading Tutorial” --------------------------------------------------------------------------------------------------------------------------------To learn more, download my Free - 5 Step Formula To More Profitable Trades http://www.OptionSIZZLE.com Joshua Belanger is the founder of OptionSIZZLE.com where he provides free and premium option trading information and resources.