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BobR wrote;
>Lets face it. Option models do not work well during expiration week.
>Premium pricing is in large part dependent on order flow stemming from
>news and other forms of manipulative persuasions.
In the UK FTSE-100 futures and options there is a predictably regular
attempt to ramp up the price just prior to expiry.
If you were extremely quick, this was particularly easy to exploit last
Friday (July 18, 1997) - the FTSE cash was rising to 2 points shy of 5000
(an all time record) just before the period at which the settlement price
is calculated. In fact this represented a 50 point rise from its
overnight close.
So what? It chose the completion of the settlement time range (about 10:30
a.m. local time or 5:30 a.m. EST) to then start a 150 point dive (3%) to
recover and end up some 70 points in the red. Definitely a major swing
day, exactly coinciding with the expiry day and the expiry time.
Does the S&P exhibit similar behaviour on option/future expiry days?
Regards, Ric.
P.S. For those of you in the US scared of the S&P antics recently, the
range for the September FTSE-100 futures on Fridays was 4830 to 5014 or 184
points (or over 3.6%) on relatively high volume. A lot of money changed
hands!
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