Cramer's TheStreet.com TV Recap: Option Expiration Playbook

Jim Cramer warned Monday on his TheStreet.com TV video, "Strike-Price Strikeout" against getting involved in stocks that are too close to their strike price.

A stock's strike price is the price at which the holder of a stock option may buy the stock. If the strike price is below the price at which the stock is trading on the open market, the option holder could turn a profit a profit; if the stock price on the open market is below the strike price, the options are "underwater."

When options are about to expire -- as they do on the third Friday of every month -- a strange phenomenon starts to occur. As traders give up on or become more desperate about their options' prospects, they take actions that affect the stock's price. What you need to know is that as options expiration looms, these forces can cause stocks to trade "artificially" at a popular strike price; the effect will lift as soon as expiration is past. But the temporary effect can be confusing and worrisome if you're not in the know.

Cramer advised in "Strike Price Strikeouts" that special attention be paid to stocks like these because it is option expiration week. He spoke negatively of American International Group (AIG Quote), which he owns for his charitable trust, Action Alerts PLUS. ...