The Expiring Option Exercise Manipulation
Game
...Or; How Stacking the
Deck on the CBOE and Loading the Dice on the NYSE
Can Make You a Million
Bucks in Less than an hour!
One of the
best ways to make a lot of money during option expiration week happens
in the last hour of trading on Thursday afternoon, AND the first 15
minutes of trading on Friday morning. It is a relatively easy seven step
process as follows:
First
you start buying a few thousand "IN THE MONEY" calls on the SPX on
the CBOE as quietly as you can around 2:20 Chicago Time. It helps
if the spoos are dropping so you can slowly pick them up real cheap and,
on most Thursdays about then, they are dropping about 75% of the
time.
Second
you start buying big blocks of the top SPX stocks on the NYSE around
2:40 (do not use the third market). That's XOM, PG, GE, T, JNJ, CVX, WMT,
PFE, and IBM in that order. Make
sure the dollar amount of stocks that you are buying closely matches the
total number of option contracts that you picked up earlier. Also, it
helps to throw in a few big orders for MA, GS, LMT, and BNI too since
they are big stocks and can move fast. The crowd on the NYSE really
wakes up and takes notice when you use them too. Your move will pop the
SPX about 2 points. If you have Level II, you can
start buying the offers on GOOG, AAPL, and AMZN at 2:41
too. That wakes up the Level III
crowd.
Then you wait
about 6 or 7 minutes for the ripple effect to hit. Hopefully your move
will panic the short day traders, making them cover before the close
(because it can trap them with margin calls in about 11 minutes if they
don't cover). They almost always panic and cover with "AT THE MARKET"
orders. And about the time the specialists are starting to run out of
stocks. The shorts will pop the SPX about 2 points. And then a
buying panic, three to five minutes before the close catches the
specialists without any stock to sell and that pops the SPX another 2 points for a total of about
six points in 20 minutes. And the SPX
usually goes out on the high of the day, with the tape running a little
late. Pretty neat huh?
Third,
you buy a few thousand of "IN THE MONEY" puts on the SPX from 3:09 into
close. Since the SPX went out on or near the high of the day, you'll
usually pick most of them up hitting the lowest offer of the day. Make
sure the total number that you pick up matches the dollar amount of
stocks that you are holding long.
Fourth,
starting at 3:16 you send notices to all of the clearing firms on all of
the CALLS that you hold to EXERCISE them that night, thereby locking in
your profit on all of your calls (the SPX went out on the high
remember). Then you break out the champagne knowing you have probably
just picked up about a half million bucks.
Fifth,
on Friday morning at 8:31 you start selling all of the stocks you bought
on Thursday afternoon. This usually starts a panic and everyone starts
dumping those stocks. And the day traders start shorting too with no bids in sight.
This usually drops the SPX about four points (and not the six that you
ran it up the night before) because there is always some buying after
the opening for option expiration to slow down the
mini-crash.
Sixth,
you sell all of your PUTS (now a little deeper in the money) on the CBOE
and go flat in all of your accounts (stock and options) knowing you have
now made another half million bucks or so.
Seventh, you leave for the weekend (and the following
week too) in the Lear to Orient Beach in St. Martin, drinking Dom in the
Rolls on the way to the airport.
That's it.
An easy seven step process. Only six if you leave out the
vacation.
Are
you thinking fine, but I don't have that kind of money to do both sides of
the trade? That is ok too. You can play the game with
very little. A few E-mini's in your futures account, or a few puts
and calls with your stock broker is very little money and very easy to
do. The amount of money you have is not as important as
knowing how to play the game.
The SEC
requires that we tell you that our past performance during expiration
week (no matter how good) is no guarantee of future success or continued
profits. The FINRA would like for us to remind you that trading
SPX options is risky (like you didn't know that) and not for all
investors. So, if you are not suitable for option trading, you should not be
surfing around on this site. Everyone should click here
before attempting any strategies mentioned on our web
site.