Trading Around Option Expiration Days
Posted in Calendar Effects, Equity Options
February 14, 2011
Are there any stock market return anomalies around the equity option expiration (OE) date (third Friday of each month)? Potential anomalies include: (1) systematic differences in returns and volatilities before, on and after OE; and, (2) systematic differences in OE returns conditional on prior-month returns. To investigate, we examine close-to-close market returns from five trading days before to five trading days after OE. Using daily closing prices for the S&P 500 Index for January 1990 through January 2011 (252 OEs, with September 2001 excluded due to trading disruption), we find that: (more…)