Why do Monday Expirations have lower IV than others?

[Sig]

• A zipped html file attached with 0-30 DTE atm SPX IV for about a week of sampling. -- Note the lower IV of the monday expirations! -- The IV being posted is the ATM IV, so one point per option term per sample time.

Thanks for bringing this up by the way, very interesting point.

 

[destriero]

Doesn't that provide a statistical edge to anyone who buys end of day on Friday's?

I doubt it.

 

[Sig]

I doubt it.

So is that because realized vol over the weekend is less and the markdown on Fri is correctly reflecting that, which wouldn't seem to be collusion, just good business by MMs?

 

[destriero]

So is that because realized vol over the weekend is less and the markdown on Fri is correctly reflecting that, which wouldn't seem to be collusion, just good business by MMs?

Well yeah, whether it's self-fulfilling herd behavior or actual collusion (which I have witnessed). I don't think that the motivation matters at all. I think the mkts are more efficient than they were when I witnessed it.

 

[stepandfetchit]

@destriero: I think you suggested to Sig, that making money off this "imbalance (pardon crappy terminology)" over weekend may prove illusive? (I hope not, but scratching my head)

 

[stepandfetchit]

Thanks for bringing this up by the way, very interesting point.

YW: Trying to get more familiar with IV. -- Seems there is much to learn/see!

 

[destriero]

@destriero: I think you suggested to Sig, that making money off this "imbalance (pardon crappy terminology)" over weekend may prove illusive? (I hope not, but scratching my head)

Nobody is trading off of paper sheets any longer so it's less choppy. You used to see vol drops on the hour and ofc we didn't have these 3x weeklies either. More players, bigger players, more efficient mkts.

 

[murray t turtle]

Doesn't that provide a statistical edge to anyone who buys end of day on Friday's?

%%
Sure can;
+some call it ''buy mondays'' also, because MON goes down so regular. Worked well on XLF last monday, but its really a short term trading signal. Mondays can easy go up/close up 4 mondays in a row/also. Good sell on xlf today.....................................................................

 

[stepandfetchit]

%%
Sure can;
+some call it ''buy mondays'' also, because MON goes down so regular. Worked well on XLF last monday, but its really a short term trading signal. Mondays can easy go up/close up 4 mondays in a row/also. Good sell on xlf today.....................................................................

Unclear what your statement relates to as XLF has only Friday Expirations. Where do you find tradeable Monday expirations options for XLF?

 

[LM3886]

If you view the html file (zipped), you will observe ALL expirations and can observe that Mondays are consistently lower, with the nearer dated Mondays being lower than others! Friday expiry's are higher! (a period of heavy backwardation would likely be different, but this seems to be the norm). -- Note that the weekend risk is included in the Monday expirations! --- This is even observable with TOS, with their "close-enough for government work" IV derivation.

How is the IV calculated? Do you use calendar days or business days?