Stan Freifeld

Make Great Expiration Day Trades

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This article originally appeared on The Options Insider Web site.

While everyone looks forward to Fridays, options traders in particular get excited about the third Friday of each month -- that is, expiration Fridays -- as they provide some unique trading opportunities.

As an options trader, no doubt you've been told to close out your expiring positions a few days or weeks before they "come off the board." And with many plays, that is likely the safest and smartest bet. However, you might be missing out on some of the most exciting action and, more importantly, profits.

Don't Let Market-Makers Take Your Cash

If you're planning to enjoy a long weekend away from your computer, it's probably wise to close out of your expiring options positions in front of that fateful Friday, as you won't be able to relax when you leave your portfolio up to chance.

But for those months when you're stationed next to your trading screen, here are some tips for making the most of the last moments you have with your expiring options.

Expiration is the time of the month when market-makers make some "bonus" money. This bonus comes from public traders who do not know how to properly exit their positions and leave nickels, dimes or more for the market-makers.

Since I'm going to tell you how to avoid this little trap, you will have yet another advantage over other options traders.

And that advice is as simple as "sell the longs and buy back the shorts."

Even though many of them would have expired worthless, it's worth a few bucks to have peace of mind.