Booyah Breakdown: Options Expiration

Then be on the lookout for "triple witching." That's not an insult for being in an exceptionally bad mood. (Although I clearly have my "triple-witch" days.)

It's actually an industry term that refers to the four times a year that futures options expire on the same day as equity options.

Futures options expire once every quarter. So on the third Friday of March, June, September and December, not only are regular options expiring, but some outstanding futures contracts are expiring as well. Expect the volume of everything to be even higher that week.

We have a triple witching coming up on Sept. 15. So pay attention.

No Option Is an Island

While you clearly shouldn't make buy and sell decisions strictly on what's happening in the options market, you can use it as a forecast to help you better understand the sentiment in your stocks, because it's all interrelated, says Tom Boggs, the Chicago Mercantile Exchange's associate director of equity products.

Thanks to the transparency of information, the impact of expiration week doesn't move stocks nearly as much as it used to, notes Boggs. But that doesn't mean there isn't a ton of information you can derive from options trading.

And to learn more about options, check out the Chicago Board of Trade's Web site. It has a great strategy section that lets you simulate option trades so you can dabble in the options world without risking your paycheck.

Just like you wouldn't just drive that Corvette home without looking under the hood, don't place a bet based strictly on volume changes in the options market. Use it as an additional metric that helps you enjoy the ride.

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