Market psychology is a cornerstone of how markets operate. Whether that’s psychology that the ‘big money’ has trained retail to follow or whether it is the psychology of traders themselves. Options expiration dates are a great way to show what I mean.
Trading is a lot like gambling; I’ve already gone over the differences of investing vs. trading in previous blog posts, and it’s a subject I’m very likely to touch on again. It’s very important.
August 18th, this past Friday, was the standard expiration for August monthly options. While many people were still holding onto options expiring that day (something you should NOT be doing because of the impact of the options greek ‘theta‘ as the primary reason), there was some hope that the markets would rally and those option holders might be able to regain some of the profits they had made. That or they were hoping their losing positions would gain in value.