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Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

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Multi-Month High during OpEx Week

Up to now major market indices defy all (seasonal) odds (hitting a fresh multi-month high on Wednesday, January 18), with SPY's (S&P 500 SPDR) closing out the week including the Martin Luther King, Jr. Day exchange holiday with a loss in 10 out of the last 14 years since the holiday was started in 1998.

But this week is option expiration (OpEx) week as well, and the the SPY's (S&P 500 SPDR) shows a statistically significant (to say the least) tendency to reverse course until and at OpEx when closing at a 3-month high during the week before OpEx in the past.

Table I below shows the SPY's (S&P 500 SPDR) performance (since 1988) one, two, and three sessions later, followed by option expiration (OpEx) Friday and at the end of the month assumed one went long on close of a session where the SPY closed at an at least 3-month high at any time during option expiration week.

Besides the fact that the SPY shows a significantly above average probability for closing at a lower level on OpEx Friday (on 50 out of 84 occurrences since 1988), it is especially remarkable that upside potential had been more or less non-existent (quite the opposite applies to downside potential). The SPY closed higher 1.0%+ on OpEx only once (max. gain +1.04% in May 1989), but lower -1.0%+ on 22 out of 84 occurrences (months).

In addition, the SPY closed lower the next day (in this event on Thursday, January 19) on two out of every three occurrences (thereof on 13 out of the last 16, with a max. gain +0.54% out of the last 40 occurrences), up 1.0%+ only once, whilst lower -1.0%+ on 10 occurrences.


Table I - SPY closing at a 3-month high during OpEx week


For the time being the trend is up, and everything seems possible, but 84 occurrences (since 1988) is quite an impressive sample size to bet against ...

Have a profitable week,


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