Mean Reversion Tendencies Surrounding Options Expiration

ETF Rewind mentions that the Monday after options expiration often has a mean reversion bias. To test this concept, I extracted the last thirty instances in which the S&P closed higher the day before and the day of options expiration. If there is a mean reversion bias, odds should favor a lower close the following Monday. The last thirty occurrences are listed below. Note that in 22 cases, or 73% of the time, the S&P closed lower the day after expiration, significantly above the 46% random chance for a lower S&P one day later in the same time frame. At least in recent years, the bias has been real…

S&P Rallies Last Two Days of Expiration Week
02/19/10… S&P500 ??? next session
08/21/09… S&P500 -0.1% next session
06/19/09… S&P500 -3.1% next session
04/17/09… S&P500 -4.3% next session
01/16/09… S&P500 -5.3% next session
09/19/08… S&P500 -3.8% next session
08/15/08… S&P500 -1.5% next session
07/18/08… S&P500 -0.1% next session
05/16/08… S&P500 +0.1% next session
04/18/08… S&P500 -0.2% next session
12/21/07… S&P500 +0.8% next session
08/17/07… S&P500 -0.0% next session
06/15/07… S&P500 -0.1% next session
12/15/06… S&P500 -0.3% next session
11/17/06… S&P500 -0.1% next session
10/20/06… S&P500 +0.6% next session
08/18/06… S&P500 -0.4% next session
03/17/06… S&P500 -0.2% next session
11/18/05… S&P500 +0.5% next session
09/16/05… S&P500 -0.6% next session
07/15/05… S&P500 -0.6% next session
06/17/05… S&P500 -0.1% next session
09/17/04… S&P500 -0.6% next session
05/21/04… S&P500 +0.2% next session
04/16/04… S&P500 +0.1% next session
01/16/04… S&P500 -0.1% next session
08/15/03… S&P500 +0.9% next session
03/21/03… S&P500 -3.5% next session
11/15/02… S&P500 -1.0% next session
10/18/02… S&P500 +1.7% next session
05/17/02… S&P500 -1.3% next session

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

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