The Options Expiration Week Effect - OPEX Seasonality

S&P 500 shows above-average returns during the options expiration week. Only July and January show negative returns during the options expiration week, while April is the best month. Overall, there seems to be an options expiration week effect.

Let’s backtest to look at the specifics of the week and days after the options expiration week. How do stocks perform the week after the options expiration week?

We backtest the following trading rules:

* Today is Friday in any options expiration week.

* We buy the S&P 500 at the close.

* We sell at the close of next Friday. Thus, we own the S&P 500 for one week (five trading days).

If we invested 100,000 in 1993 and let this amount compound until today (while only being invested during the week after options expiration week), we get this equity curve shown below.

We publish the Amibroker code and detailed performance of the Options Expiration Week Effect here >>

https://www.quantifiedstrategies.com/the-option-expiration-week-effect/