By InTheMoneyStocks.com on February 19th, 2010 12:36pm Eastern Time
Options expiration week was unique in some ways and the same old, same old in others. The manipulation stayed the same, however, volume for an options expiration week has been ridiculously light. That probably helped the manipulation factor even more. The previous 6 weeks saw the markets ripping up and down with intense volume. In fact, on February 5th, 2010, we matched the volume on the SPDR S&P 500 ETF (NYSE:SPY), when the markets bottomed in early March 2009. Truly amazing. Yet options expiration today showed us no volume like the previous four days. This enables the markets to be floated higher and not only helps the institutions make money on premiums, and also helped the Federal Reserve with their announcement of the raise in the discount rate. Just think of all those people buying puts on the market over the last few weeks as we fell. Whoops! Leave it to one light volume week to take us higher and close all those put contracts worthless. Who makes that money? Generally, the institutions are the ones selling the options contracts. Once again money goes from the average hard working individuals hands to the institutions. Does it surprise anyone? Add in the extra jolt from the Federal Reserve and just think about all the "average Joe's" that got whipsawed and fleeced.
The Federal Reserve came out just after the markets closed yesterday and told the markets the discount rate was moving higher by .25%. The futures were crushed. However, this move was done with extreme care. Notice how the announcement was made with the maximum time until the next days markets would open. By doing this calculated move, they made sure that comments and concerns could be dealt with and the soothing of the markets could take place. Very smart! In addition, the light volume today on this options expiration Friday, would make sure the markets not only would reverse those overnight futures losses, but show gains by the end of the day. Well done Ben Bernanke!
Do I agree with this? No, the markets have become so manipulated that it really only pays to be a trader or short term investor. However, knowing the rules can make you a winner. All I can say is this. Learn the rules, learn the game, play the game and profit!
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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