September ends tomorrow (actually the opening print Friday of the SPX settlement price) for me. I can’t trade/adjust/balance/ my position beyond the close tomorrow. The $SPX, $COMPQ, $RUTX and other broad based indices cannot be traded after the close tomorrow . Why does this matter? Because I’m not the only one who will be closing their position in these names and, more importantly, the returns for opex differ from the monthly returns.
Take a look at the graph above and you can see that over the last decade there have been several occasions where the option expiration return (blue) differed from the monthly return (brown) of the SPX. Each option cycle goes from the first Monday following the third Friday through the third Friday of the next month. This means that the differences in returns is occurring in a relatively short time period.
As an option trader I’m busy selling premium for the October cycle this week while pure stock traders are still focusing on September. I’d love to get your thoughts on this data so please chime in via the comments section below.