On expiration day, option traders are in tune with the potential for “pins” to occur, in which a stock, index, or exchange-traded fund closes right on (or within a few cents) of a strike price. That said, Apple Computer (AAPL – $499.24) is currently trading around a key round-number, century-mark level, where a 500-strike pin is quite possible by 4:00 p.m.today.
For sellers of AAPL options, a close at $500.00 or within a few cents of $500 would be optimal, as both put and call open interest at this strike dwarfs open interest at any other strike in the January series. For option buyers, a $500 close would be the point of maximum pain.
Below AAPL’s January open interest configuration chart is a Friday regular expiration closing history since 2010. In 22 of the 36 past regular expiration Fridays, AAPL has closed within a $1 of one of its five-point strike intervals. I chose $1 because it is such a high-priced stock,and premium sellers at that strike likely win in such a scenario. The 22 of 36 pins, or 61-percent probability, is high, since the expectation is that AAPL closes within one point of a five-point strike only 40 percent of the time. The take-away is there is a high probability of a pin, and if you are betting on where this pins occurs today, $500 would be the bet, given it is a round-number strike in which premium buyers feel the most pain.
Apple – January Open Interest Configuration
AAPL – Friday expiration closes since January 2010