Friday is Payday

Today is Thursday, and with the weekend right around the corner, I am reminded of a conversation I had a few weeks ago with a non-options trader…

This buddy of mine complains regularly about having the most boring 9-5 job in the world, and on this day, he was going on and on about how much he loves his “Fridays”.

Just for kicks, I asked him why.

“Why?”, he said, “Duh… Because that means the weekend is here!” (or something along those lines)…. as he looked at me like I was a little dense or something.

Now, don’t get me wrong, I LOVE Fridays too. But not because I get two days off from work. It is for a completely different reason.

It is because for option sellers, the third Friday of every month means payday! And I love getting paid!!

So, let this serve as a friendly reminder to other options traders that tomorrow, May 20th, is option expiration day.

Remember: any option that is in the money by so much as 1 penny will be automatically exercised tomorrow. To keep from being exercised, make sure to buy back the options that you sold if they are ITM (in-the-money).

I talk to traders weekly who do not understand how to use and apply probabilities when selling calls or puts.

They pick strike prices the same way a gambler picks ponies at the race track… simply by guessing.

Or worse, they allow their “greed glands” to determine what strike price to buy… (see yesterdays post below about what I had to say on that).

But 95% of traders have no idea that they can be selling options.

That is a scary way to trade and certainly not something I advocate. Those who like to trade this way blow up their account, and then move on to the next thing, never making it to the winning team. Never becoming an All Star.

The KEY to success in this game is probabilities.

Trading is not about being right or wrong, it is about putting the probabilities on your side.

Option sellers love Fridays. And we really like to get paid.

Talk Soon,

Jeffrey Ziegler



One Response to “Friday is Payday”

1. Tony Monk says:

   May 20, 2010 at 7:23 pm

   Very well put Jeff, thank you.