The influence of the option expiration day?

A

archer001

I remember that someone at ET has discussed the influence of the option expiration day on the stock index. But I can not find it right now, any one can help me on this?

The reason I ask this is that yesterday is an option expiration day, I want to know does it has any relation to the rally?
 
Quote from archer001:

I remember that someone at ET has discussed the influence of the option expiration day on the stock index. But I can not find it right now, any one can help me on this?

The reason I ask this is that yesterday is an option expiration day, I want to know does it has any relation to the rally?
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Yes.

However, the relationship is not the rally.

The relationship is trend days and when they occur during an Option Expiration Week.

Also, take a look at your historical intraday charts to find these types of tendencies.

Mark
 
If the open interest of call is larger than put, then there is tendency for up trend; and vise versa, am I correct? Is this what you mean?

thx!
 
Quote from archer001:

If the open interest of call is larger than put, then there is tendency for up trend; and vise versa, am I correct? Is this what you mean?

thx!
More...

No...my commentary is in reference to Index Futures price reaction during a Options Expiration Week.

Mark
 
Quote from archer001:

I remember that someone at ET has discussed the influence of the option expiration day on the stock index. But I can not find it right now, any one can help me on this?

The reason I ask this is that yesterday is an option expiration day, I want to know does it has any relation to the rally?
More...

99% of the time that is an up week.
 
Where can I find the reference you mentioned?

I've googled, but not find it:(

Quote from NihabaAshi:

No...my commentary is in reference to Index Futures price reaction during a Options Expiration Week.

Mark
More...
 
If there is more put interest then call interest, then prices will tend to go up.

If there is more call interest then put interest, then prices will tend to go down.

Price tends to go in the direction that will make either the puts or calls worthless.

In the last few months, there has been a tremendous amount of puts purchased as "insurance" against a market meltdown. Unfortunately, put/call ratios are back down to where they were before the February correction.

The next options expiration week might be more bearish then bullish.
 
Quote from myminitrading:

99% of the time that is an up week.
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Why do you guys say crap like this..The guy is asking a legitimate question. Why be a wise a$$.

All these so-called gurus on this site never talk straight forward. It's all theoretically speaking, or some paradoxical BS. If you have a point make it. Are you afraid to speak specifically because a lack of knowledge, or, are you just trying to validate your own self importance. Nothing personal guy, it's just most people on this lame site do this.
 
Quote from archer001:

Where can I find the reference you mentioned?

I've googled, but not find it:(
More...

Hi archer001,

First of all, my commentary is different than myminitrading to prevent any confusing statements.

Secondly, I'm talking about Index Futures such as ES, NQ, ER2, YM, DAX, CAC40 and FTSE100.

Also, I've never seen any source about this that can be googled.

However, its easily verifiable via anyone with access to historical intraday data and historical calendar info about Option Expiration weeks.

If you don't have access to historical data...

Start accumulating data today.

Also, I'm not talking about rallies which is a phrase someone uses when the market is moving upwards strongly.

I'm talking about trend days (up or down) when they are most likely to appear during a Option Expiration Week.

As a trader, I don't care if its a strong trend up or a strong trend down...I just want it to trend."

A trend day from Open to Close and not via an overnight gap that the price action then goes sideways after the Open.

This has a tendency (trend day) to occur in the first few trading days of the week.

How is that info useful to a trader?

Most successful traders put emphasis on position size management...

When to go large, when to lower the size due to market conditions not favorable for big profits.

However, I'm not saying the rest of the week can't be profitable.

I'm just saying if position size managment is important to you...

You know know when to try and catch a big profitable trade during Options Expiration Week.

Something else, this is also not a time (early part of the week) to be averaging into losers when wrong as a day trader. :D

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
NihabaAshi, thx for your explaination, clear enough! You don't care whether the trend is up or down, but there is a trend.

I am also thinking about the rationale behind what michaelscott has said.

As michaelscott said, more puts than calls can be interpreted as bulllish, while previously I was thinking of the oposition.

so the question is: should this puts open interest be interpreated as hedge, or as speculation.

If it is hedge, the option buyer are bulls actually.
If it is speculation, the option buyer are bears.
 
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