Studies - Posted on Friday, January 14, 2011, 6:05 PM GMT +1

3 Comments


Jan Friday 14

January Option Expiration Week

A short reminder:

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In my last posting ( see Martin Luther King, Jr. Day Week ) I showed that the S&P 500 shows a remarkably negative bias during Martin Luther King, Jr. Day week (celebrated on the 3rd Monday in January), but due to the fact that it had been added to the list of exchange holidays not earlier than 1998, the number of occurrences is limited.

But next week will be January’s option expiration week as well, which not necessarily overlaps with Martin Luther King, Jr. Day week (it only overlaps if the first day of January is a Saturday, a Sunday or a Monday ;  in this event No. of Sessions is ‘4‘ in Table I below).

Table I below shows all occurrences (since 1974 ; in 1973 standardized exchange traded call options were released for trading by the Chicago Board of Options Exchange (CBOE) and the Options Clearing Corporation (OCC)), the S&P 500′s performance during January’s option expiration week, the number of sessions, the maximum gain and maximum drawdown – on a close to close basis – during the period under review, and the day of the week where the index posted it’s higher and lowest close in the past.


+ no close below trigger day’s close during period under review
no close above trigger day’s close during period under review

It is interesting to note that January’s option expiration week has been a down-week for the S&P 500 on the most recent 6 , on 8 out of the last 9 and 10 out of the last 12 occurrences.

Conclusions:

If the market is really ‘due‘ for a short-term correction, the next week might provide a favorable (seasonal) opportunity for the bears.

Successful trading,

Frank

Disclosure: No position in the securities mentioned in this post at time of writing.

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Remarks: Due to their conceptual scope – and if not explicitly stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets).

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Disclaimer

The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

(Data courtesy of MetaStock , and for data import, testing, surveys and statistics I use MATLAB from MathWorks)

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Comments (3)

 

  1. […] This post was mentioned on Twitter by Frank Hogelucht, zortrades, ukarlewitz and others. ukarlewitz said: Remarkable neg bias next week RT @TradingTheOdds URL: http://bit.ly/i9l5WV ($$ $SPX $ES_F $NDX $NQ_F) […]

  2. […] Seasonal tendencies work against the market this week.  (Trading the Odds) […]

  3. […] 500 on the most recent 6 , on 8 out of the last 9 and 10 out of the last 12 occurrences (http://www.tradingtheodds.com/2011/01/january-option-expiration-week/).  And to boot, we have some market moving companies reporting this week: $C, $AAPL, $GS, $IBM, […]

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