Intraday trading at expiration: Friday Mar. 11, 2022

Calls are for the ESH22 weekly options expiring Fri. Mar. 11

Overnight the market was trading listlessly near 4240, but rallied up to 4280 around midnight. By the start of the premarket session a (false) rumour that peace had broken out in the Ukraine pumped the market quickly to almost 4340, a 100-point rally from the overnight low. It immediately began to sell off into the open.

The night before Nat had recommended buying a 4250-5200 Put if the market got near 4300.

option trading. 4250 is meanline. ES pop near 4300 area during overnight, looking for buy 4250, 4225 or 4200 puts. If ES drops near 4210 or below near 4175 area first, looking for buy 4300 or 4275 calls and sell it while ES attempts to fill gap in first hour trading.

Chat room transcript

The market popped as expected, and the Puts dived as a result. In the pre-market it was possible to buy the 4250 Put under $6, and that price was available for almost three hours before the open. As late as 11 a.m., when the the market had fallen more than 70 points from the overnight high and the ES was trading around 4270, you could still buy the 4250 Put for less than $10.

With the wisdom of hindsight it is easy to think that was a trade everyone would take. But it was never that simple and clear-cut.

A $10 premium required you to risk $500 to buy an option that expired in about 4 hours, and the ES had to drop another 30 points before you would break even. No sure thing.

As it turned out, this was Friday afternoon with a war going on, and and nobody wanted to go home with an open position. The ES dropped another 70 points and the 4250 Put that cost $6 before the open was worth $50 at the close. At the best entry the maximum risk was $250; with the best exit, the potential profit was $2250. You didn’t have to get the whole hog to eat well that night.

Candlesticks are ESH22 Mar 11. The coloured OHLC bars are 4250 Puts. Scale on right axis is ES; left axis is option. Time stamps are Central Time (Chicago).

Chat room transcript:

Transcript

Outcome

OptionEntry PriceExit PriceProfit/Loss
4250 Put exp. Mar. 11< $10> $40$500 – $1500