Intraday divergences that happen during the trading day yield even greater returns on Expiration Friday. Why?
Because there is no time premium left. Out of the money options can make significant gains intraday.
Take a look at what GDX did Tuesday, May 9, 2017. This 5-minute chart shows the MACD divergence that was in place during the day on GDX. You can see the MACD shows that the price of GDX should be HIGHER RIGHT?
5 minute divergences by the nature of the shorter time frame, only usually last a short time, and the effect on out of the money options can be magnified significantly when the divergence occurs on Expiration Friday.
Look at the GDX 21.5 calls that expire May 12. You can see the out of the money option gained around 60% in one hour of trading, and THAT’S NOT EVEN EXPIRATION DAY. Of course you probably noticed if you’d held this option into the following day you caould have gained 250% or more.
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