What’s the deal with Thursdays before opex?

Is there any truth to the saying that the Thursday before option expiration is typically the low heading into the next week? In a word, no. I’ve heard this line mentioned several times by some well respected traders that I thought I should take the time to find out for sure. Bottom line is that there is no statistical significance to how the S&P performs the week following the Thursday before option expiration. Here’s a few bullet points:  

  • Since January of 2000 52.7% of the time the Thursday before option expiration has been the low going into option expiration week.
  • February had the most occurrences (9) where the Thursday before option expiration was the low going into opex week.
  • Both June and July had the least occurrences with 4 each.
  • There was no significance with respect to whether or not the SPX was above or below the 200-day SMA.
  • The longest streak of occurrences where the Thursday before opex was indeed the low going into opex was 6 from August of 2006 to February of 2007. 

One other item of interest was that there is a greater tendency for the Thursday before option expiration to be the low going into opex towards the beginning of the year. Specifically the months of February, March and April.