Expiry Fridays and Volatility

Discussion in 'Index Futures' started by guy2, Jun 8, 2005.

Are Expiry Fridays more volatile

  1. I have heard that they are and believe it

    3 vote(s)
    27.3%
  2. I have heard that they are but don't know

    3 vote(s)
    27.3%
  3. I have heard that they are and don't believe it

    4 vote(s)
    36.4%
  4. I have never heard that about Expiry Fridays

    0 vote(s)
    0.0%
  5. Other answer not listed

    1 vote(s)
    9.1%
  1. guy2

    guy2

    I have often heard it quoted that Expiry Fridays (3rd Friday of each quarter) are more volatile days than usual. What have you heard?

    In addition to this, does anybody have a link to research that confirms or denounces this "fact"?

    (In particular I am thinking of the CME index futures here.)
     
  2. Vince1

    Vince1

    What I have read is that expiration days can display either unusual volatility or dullness. The activity the week before the Friday being the tip-off - high volatility tends to lead to dull expirations, etc.
     
  3. guy2

    guy2

    So what you have heard is that there is an inverse relationship to the volatility experience from Monday to Thursday versus the volatility on the Friday - right?

    Where did you hear that?
     
  4. yenzen

    yenzen

    That expression may have been born in the late 1990's. I can still remember a time back in 98-00 when guys could and would buy expiration day straddles in the OEX on the thursday prior to expiration and would come out ahead a vast majority of the time. Nowadays it seems that the volatility kind of peak's out on the Wednesday prior to expiration with a few notable exceptions such as April, 2005.

    Senor Zen
     
  5. Vince1

    Vince1

    "Have a look at how trading unfolds in the week before the quarterly (...) expirations. If share prices are volatile (...) it often indicates that major players are unwinding positions prior to maturity. This suggests that Friday is likely to be a yawner. However, if events are quiet early on, it is frequently a sign that intraday volatility may be set to increase during the latter part of the week".

    (Michael Panzner, The New Laws of the Stock Market Jungle, pp. 127-128)
     
  6. guy2

    guy2

    Thanks for the quote - I don't have that book but perhaps I should get it.
     
  7. Vince1

    Vince1

    Actually, I was kind of disappointed by the book but this is another story++
     
  8. guy2

    guy2

    Okay I won't read it then.