This is a Guest Blog from RiskReversal.com's Enis Taner.
The price action in Apple this week is a classic example of a phenomenon that occurs every January when options expire.
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When I was an options market maker, I would dread January expiry. It was a bookkeeping nightmare, since it was by far the largest expiry of the year, with hundreds (sometimes thousands) of options all expiring in my portfolio on the same day.
January expiry options are listed two years in advance (you can trade January 2015 options in many names as of today), so the options positions would build up over the course of that time. Once expiry day finally came, I had myriad residual positions to watch and clear.
(Read More: Options Explained.)
As a result, my anecdotal experience was that January expiry would lead stocks to "pin" important strikes more often than usual. Market participants would have larger-than-normal interest on particular strikes, and the mere act of re-adjusting their positions as the options expired would often lead to the stocks to pin those levels.
Take a look at Apple's 5 day chart (with the $500 level highlighted in red):