Introduction
Options trading is a complex but potentially rewarding strategy that can offer traders the potential for outsized returns. However, it is crucial to understand the nuances of options trading, particularly when it comes to trading options at expiration. In this article, we will delve into the intricacies of trading options at expiration, exploring the strategies and tactics employed by renowned trader Jeff Augen.
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Jeff Augen is a veteran options trader with more than three decades of experience. He is well-known for his expertise in trading options at expiration, and his insights have proven invaluable to countless traders over the years.
Strategies for Trading Options at Expiration
There are three primary strategies that Jeff Augen employs when trading options at expiration:
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Trading Liquidity: Just before expiry, the market for options contracts thins out considerably. Augen looks for options with large open interest to ensure he can easily enter and exit trades.
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Scalping: Augen employs rapid, small-profit trades around a neutral position near options expiry. This strategy capitalizes on brief price movements, taking advantage of fast market reactions.
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Selling Premium: Augen often sells premium on options near the end of their lifespan. This involves selling out-of-the-money options that will likely expire worthless, generating small profits.
Tactics for Maximizing Returns
In addition to the three primary strategies, Augen utilizes several tactics to maximize his returns when trading options at expiration:
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Monitor Implied Volatility (IV): IV represents the market’s expectations of price fluctuations. Near expiration, IV tends to fall. Augen seeks opportunities where IV is elevated relative to historical norms.
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Manage Risk Tightly: Trading options at expiration involves significant risk. Augen employs strict risk management techniques, including using stop-loss orders to limit potential losses.
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Seek Asymmetry: Augen seeks trading setups where the potential reward outweighs the risk. He looks for opportunities with a favorable risk-to-reward ratio.
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Trading Options At Expiration Jeff Augen
Conclusion
Trading options at expiration is a specialized area that requires a deep understanding of options trading principles and a disciplined approach to risk management. By embracing the strategies and tactics employed by Jeff Augen, traders can increase their chances of success when trading options near their end of life.
Remember, the information provided here is for educational purposes only and should not be construed as investment advice. Consult with a financial advisor before making any investment decisions.
