Expiration Week Volume Pattern

I found it particularly noteworthy that the S&P kicked off this options expiration week with a low-volume selloff. NYSE volume traded just under 1.5 billion shares on Monday, lower than any day of the preceding week. Historically, when the S&P starts expiration week with a down day on light volume, it’s a bullish sign for the remainder of the week. The last thirty times this has occurred are listed in the table below, beginning with the expiration Monday in which the S&P closed lower and followed by the performance of the S&P500 over the next four sessions…

S&P Down Monday of Expiration Week on Lightest Volume in Five Days
05/11/09… S&P500 ??? at Friday’s Close
12/15/08… S&P500 +2.2% at Friday’s Close
07/14/08… S&P500 +2.6% at Friday’s Close
04/14/08… S&P500 +4.7% at Friday’s Close
09/17/07… S&P500 +3.3% at Friday’s Close
08/13/07… S&P500 -0.5% at Friday’s Close
02/12/07… S&P500 +1.6% at Friday’s Close
02/13/06… S&P500 +1.9% at Friday’s Close
09/15/03… S&P500 +2.1% at Friday’s Close
01/13/03… S&P500 -2.6% at Friday’s Close
11/11/02… S&P500 +3.8% at Friday’s Close
08/12/02… S&P500 +2.8% at Friday’s Close
04/15/02… S&P500 +2.1% at Friday’s Close
11/12/01… S&P500 +1.8% at Friday’s Close
07/16/01… S&P500 +0.7% at Friday’s Close
04/16/01… S&P500 +5.4% at Friday’s Close
06/12/00… S&P500 +1.3% at Friday’s Close
03/13/00… S&P500 +5.8% at Friday’s Close
11/15/99… S&P500 +2.0% at Friday’s Close
10/11/99… S&P500 -6.6% at Friday’s Close
09/13/99… S&P500 -0.7% at Friday’s Close
06/17/96… S&P500 +0.3% at Friday’s Close
11/13/95… S&P500 +1.3% at Friday’s Close
10/17/94… S&P500 -0.9% at Friday’s Close
01/17/94… S&P500 +0.3% at Friday’s Close
11/16/92… S&P500 +1.4% at Friday’s Close
01/13/92… S&P500 +1.1% at Friday’s Close
12/16/91… S&P500 +0.7% at Friday’s Close
03/11/91… S&P500 +0.2% at Friday’s Close
01/14/91… S&P500 +6.3% at Friday’s Close
12/17/90… S&P500 +1.8% at Friday’s Close

Note the strong propensity for the S&P to bounce back from a low-volume start to options expiration week. In 25 out of 30 cases, or 83% of the time, the S&P closed higher at Friday’s close, significantly above the 55% at-any-time odds for a higher S&P close four sessions later.

Categories : Archived EOD Commentary, End-of-Day Commentary

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