Obviously from the level recap post above, the day turned into a trend day which was very much unexpected for a stock options expiration day where usually price finds a small range by the afternoon and hibernates until the following Monday. It’s been a while since I can remember a trend day on an option expiration day.
In chat, I had published my day’s ES low frame at 41/44 which price quickly dropped into after the cash open. The published DTG 43.50 level showed a couple order flow potential long opportunities and the low frame was holding the day for over 90 minutes until price broke down through the DTG 39.25 level which stopped out any long trade taken in either the DTG 43.50 level or DTG 39.25 level.
Below the 41/44 low frame, I’m thinking about finding trend short opportunities and (as I posted in chat) was hoping for a pullback into the DTG 39.25 level. The pullback wasn’t very deep so it was tough to make a commitment to a short trade. My day unexpectedly ended early before I could short as I got pulled away from trading by an emergency aging parent situation. Later in the evening, I was very surprised to see how far the ES had moved; fear had kicked as the ES tumbled through strong support area after strong support area. Seven DTG levels in total, a 25 point move with small pullbacks. Any counter-trend trade was crushed (well maybe not from the DTG 24 level, but that would have been the toughest level to trade after watching price move through 6 other levels and most trader’s risk management should have stopped trading long before then). Microsoft and Google earnings were blamed for the tumble, but the abnormal options expiration day added option traders to the fear mix as positions they thought were locked in for profits suddenly were showing growing losses.
This was a ‘fat tail’ day and there will always be days like this that show up from time to time. It’s trend days like these where counter trend traders get crushed. It’s a part of trading and a big reason why every trader needs risk management as part of their methodology.
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