Coincidence or Not? - the Largest Squeezes happen right before Options Expiration.

Discussion in 'Trading' started by aeliodon, Oct 9, 2007.

  1. I've noticed this trend over and over again. We rally going into options expiration then we sell off afterwards only to rally back going into options expiration.
    Its like selling premiums is the bread and butter trade out there for most funds. But not every fund is as reckless like Victor N.

    2/27 sell off started after expiration.

    July sell off started after expiration.

    Bernanke's last minute bear blowout on 8/17 was just classic.

    I don't do research and back testing but for you guys that do: I bet that the closing price on the third Friday of the month tends to be higher than the average for the 1st, 2nd, and 4th Friday close.
  2. Any thoughts on why?

    Very interesting observation. I recall reading that more funds are focusing on options mm and/or new entries into options market. Wasn't their also a change in margin requirements for options, this could also play a role if margin rules affect those other than retail. I don't know, just posting thoughts.