Option Expiry

Options expiration…you either love it or hate it. Many see the week as one of market manipulation while others see it as an opportunity to make some serious coin. I love option expiration week because one cycle is ending and another beginning. I’m closing out the prior cycle and stalking my positions for the next so I’m relatively busy during expiration weeks.

This particular week is what’s called “quadruple witching” where the stock index futures, stock index options, stock options and the single stock futures all expire. This event occurs every option expiry in March, June, September and December. The only difference between triple witching and quadruple witching is the expiration of single stock futures and I’m not 100% sure but I believe SSF are on the same path as mutual funds.

If you are interested in learning how to effectively trade options on expiration week the best book is Jeff Augen’s “Trading Options at Expiration” The title kind of gives it away, no? I can highly recommend any of Augen’s books regarding options as they can add value to anyone’s trading. For those that prefer the web, I’ve collected a few pertinent links regarding options and options expiration from some of my favorite blogs and market participants.

Whether or not you trade options, it pays to have an understanding of the potential impact the derivative has on the underlying. I don’t trade currencies or treasuries but I have an understanding of how they impact equities. If you have some good links to option expiration articles that I may have missed (I’m sure there are many) feel free to post them in the comments.