Each day I like to look at the most active options that are trading. Why? It lets me see what the dumb money is doing. Why are the most active options being traded dumb money? Pretty simple answer.
They are trading option that usually expire during the week or next week. Earlier this week Apple (AAPL) was trading tons of contracts at $143, $144 and $145 for this week’s expiration. They were smart on Tuesday and Wednesday but got crushed today. With the stock back at $143.25 the $144 and $145s are basically worthless today especially if we get more weakness ahead on Friday.
A better way to trade is to buy options several weeks out and give yourself the “time to be wrong before your are right”. Witness on Tuesday I recommended the July 23rd SPY $432.50 Put that did not work the rest of Tuesday or Wednesday but came through today with a 60% return in OptionsIndexTrader.