Myth Buster?
So, remember that urban legend that states As Goes the Market The Thursday Before Expiration, so it goes in reverse into the actual Expiration?
Well, we had a big up day yesterday, which surely means we will get plowed from here on in. At least that’s what our forefathers told us.
But also, Rob Hanna and has Quantifiable Edges database took a gander at the issue back in April, and found pretty much no “there” there.
Buying (shorting) at the close on Thursday before expirations week if the market was down (up) and selling (covering) the Friday of expirations would have netted the following results since July 1978:
Trades – 354
Winners – 171
Losers – 182 (1 breakeven)
Average trade - -0.08%
Now the market generally sux, so it won’t shock anyone if we head back south sometime soon. But it’s pretty safe to say it will have nothing to do with some sort of expiration rule.
another legend .. the thursday before exp week, often reverses the trend going in, if too many options have been bought in favor of the trend
any data on that one Adam?
I can ask, but that one may be hard to quantify.
I think the best rule is that the volatility trend heading into exp. week tends to magnify. Which doesn’t say that much this go around as volatility is chopping around.
Adam,
Another spin on this that I would love someone to test. If you went contrarian to the market on Thursday morning and sold them at the close on Thursday. I can think of several times this would have worked.
For example: Bought Calls at 10am on Thursday and closed the positions on Thursday at the close.
both trades the thursday before expiration?
Hi,
Im putting together a short list of Bull Put Spread candidates for a former client of mine.
any ideas on stocks you feel that have been beaten up that wont go much lower based on book value, div, buy back and other fundamentals.
Im thinking FCX, FLR, maybe AAPL,
The ideal would be 4 stocks in diff sectors..
i need liquidity too. he will probably do 200 contracts each.
thanks a bunch
bob
oh, im looking far out of the money.
these are credit spreads
im willing to take less premium in exchange for higher probablility of expiring.
for DEC expiration.
thanks!
What about ag, like POT or MOS? Other ideas maybe RIG or just OIH.
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