Pinning
Definition · Level 3 · Spreads & short options
Keep reading with Tradecraft
Without an account, you can read three definitions every 30 days. Tradecraft explains all 738 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
An observed, not guaranteed, tendency of a stock to settle near a strike with very large open interest into expiration — most likely when dealers are long gamma there, so their hedging leans against moves away.
Example
“Huge open interest at 100 — it might just sit there till Friday.”
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Butterflies: targeting a price”: Body and wings, the lottery-like payoff, iron flies, short flies, broken-wing and unbalanced flies.
Related terms
- BodyThe middle strike of a butterfly, short in a long fly — where a long fly earns the most at expiration.
- Broken-wing butterflyA 1×2×1 fly with one wing further from the middle than the other (e.g. +95C −2×100C +110C); cuts or removes risk on the near-wing side and adds it…
- Iron butterflyCredit tent: sell an ATM straddle and buy an OTM strangle as protection (sell 100P + 100C, buy 95P + 105C).
- Long ButterflyBuy one low strike, sell two middle, buy one high (1×2×1).
- Short ButterflyThe reverse fly: sell the wings, buy two of the body.
- Unbalanced ButterflyA butterfly whose wings have unequal quantities — here +1 / −3 / +2.