Options Expiration Week

Ok, some I'm late on my pairs trading post. My goal is to try to update this blog three to four times a week. Since most of my postings involve a fair amount of writing or work, I tend to blog less than if I were simply providing brief commentary on links or third party data. I'll do that at times too but I'm never going to be posting once or twice per day.

So, are we headed for a summer rally given the pricing action this week? Well, once again I point you to the disclaimer clearly posted on my site. But, the answer is still no given my work. Could we bounce around a little on the upside? Sure. A major new assault higher? Extremely high odds answer of no. Remember, there are those who predict and use opinion to decide their investments and there are those who use quantitative analysis. ie, Clearly measurable data and mathematical algorithms. Math has no opinion and while it may yield questionable results at times, that is usually because the author has made a mistake. Math never lies. It doesn't need to. Investment pontificators and opinionators do a swell job of that.

If you are an investor, there are some basic things you should understand. One of them pertains to this week. The third week of the month is options expiration week. It's also futures and a few other things but let's keep it to options. The market price action options week is often such that it has nothing to do with the prevailing market conditions or trend. ie, A raging bull may end the week down or vice versa. There are many theories for this but none of them an exact science. One is options pinning where prices gravitate towards strike prices with high open interest. One is that options tend to expire where the most pain is inflicted based on a distribution of all puts and calls. Regardless, one should not get too enthusiastic or bearish based on pricing action during options expiration week.