Don't Forget, It's Options Expiration Week

I like to call it Opposite George week (a Seinfeld reference) and for a reason.

There is generally financial incentive for market makers to reverse whatever's been working in the stock market leading up to options expiration week. Stocks that have been climbing relentlessly for a few weeks to a few months can attract a large number of call buyers. As a result, there could be a significant amount of net in-the-money call premium that market makers will have to pay out - unless these recent winners begin to reverse and lose ground. Enter Datadog, Inc. (DDOG):

Enter Datadog, Inc. (DDOG):

Keep in mind that software ($DJUSSW) has been on fire in 2023 - on both an absolute and relative basis.  So shorting DDOG, a software stock, obviously carries quite a bit of risk.  And I've been bullish since last June, so I'm not exactly a fan of shorting anything.  But options expiration week can be the one week to take a chance or two on the short side.  DDOG closed at 88.75 on October 25th, 2022 and it hasn't closed higher since.  There have been a few attempts (red arrows above), but all have been unsuccessful.  Given the current amount of net in-the-money call premium ($34.3 million) and a max pain price of 73, I wouldn't expect DDOG to make the breakout now, but anything is possible.  Shorting at price resistance makes sense to me as a reasonable stop can be used to mitigate the damage if DDOG does continue higher.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.