Agreed. A "pattern" transitions from exploitable to untradeable. How about this though. Have you noticed some of the bizarre SPX settlements that come out of the opening prints? It's IMPOSSIBLE for me to believe that basis volatility like that isn't "purposeful" and because of it's opaqueness, impossible to gauge.
You can read the paper at http://www.afajof.org/pdfs/2005program/UAbstract/A847_Derivative_Securities.pdf.
If I was big enough, believe me I would try to manipulate stocks, why wouldn't they? Maybe I'm paranoid, I don't know. But the last 4-5 expirations on GOOG makes me think that my assumptions are correct. ozzy P.S You guys are going to think I'm crazy for saying this. But I also think a few institutions/HF's pulled GOOG down to 290 with pre hand knowledge of GOOG's earnings in order to snap up a shit load of options/shares at rock bottom prices. P.P.S I'm not a conspiracy theorist in any way and I actually do not like ppl who are. But I think there are some shady things going on this business. Someone tell me I'm wrong.??
we know that students are not as smart as they once use to be but now comes the revelation:"THEY NEVER TRADED OPTIONS SO THEY ARE QUALIFIED TO TELL PEOPLE NOT TO TRADE OPTIONS??? ARE PROFESSORS DUMBER THAN WHEN I WENT TO SCHOOL??? NOW YOU KNOW WHY ONLY MORONS CITE ACADEMIC STUDIES TO PROVE POINTS.. thx for the revelation
Isn't it convenient that GOOG (340), SBUX (55) and others closed on the even money today. The researchers are correct. ......"Stock Price Clustering on Option Expiration Datesà Sophie Xiaoyan Nia, Neil D. Pearsona,*, Allen M. Poteshmana aUniversity of Illinois at Urbana-Champaign, Champaign, IL 61820, USA August 27, 2004 Abstract This paper presents striking evidence that option trading changes the prices of underlying stocks. In particular, we show that on expiration dates the closing prices of stocks with listed options cluster at option strike prices. On each expiration date, the returns of optionable stocks are altered by an average of at least 16.5 basis points, which translates into aggregate market capitalization shifts on the order of $9 billion. We provide evidence that hedge re-balancing by option market-makers and stock price manipulation by firm proprietary traders contribute to the clustering......" ).
I'm sorry, I accidentally posted the URL for just the abstract. Full paper at http://www.business.uiuc.edu/poteshma/WorkingPapers/NiPearsonPoteshman.Jan2005.pdf. You may have read the paper already, as it's over a year old (the journal accepted it in August 2004) and a thread or two on this forum have mentioned it.
You're so right! It's much easier to write about trading based on unrealistic assumptions without the inclusion of human factors.