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this early exercise, rollover, or closing of positions prior to Friday started to happen several years ago when the SEC called the CBOE and
other options floors as well as large traders to task for the extreme volatility that occurred on option expiration Fridays. The public
appeared to be outraged. Or so the SEC stated. To avoid this the large traders in options saw fit to close their positions early to avoid any
punitive action by the SEC. That is my understanding of the situation. After that the big volatility and volume day turned out to be
Wednesday. At times it would end up being Tuesday and sometimes Thursday, but most often Wednesday. If there is a reason for it being
Wednesday, I don't know what it is .
Ralph Volpe wrote:
> I had heard recently that option positions are being closed out earlier
> than the Friday of expiration so as to smooth out trading on that final
> day. I also heard that the Wednesday before is usually the biggest
> close-out day to unwind positions. I haven't studied this, but if
> yesterday's action was due to unwinding option positions, could that not
> be a signal for tomorrow's action? My guess is that Friday will track
> Wednesday and the severety one way or the othere would depend on how
> many positions still need to be closed out. What I'm basically asking
> is, has anyone studied the relationship between Wednesday and Friday
> prices when Friday was the close-out day?
>
> --
> Ralph => E-mail => rjv@xxxxxxxxxx
>
>
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