1 reply to this topic

[Darris]

From the Thread below there was a question about the Monday after OPEX, so this post just summarizes some repeatable patterns base on years of observation. 1/ When does it start: Anytime the week before expiry, using simple oversold indicators, a trader can attempt to take a long position if those indicators are flashing buy. I have mine, but they are so simple, they are not worth noting (CCI, RSI, %R, etc). Maybe once or twice a year it might happen on the Friday two weeks before expiry. Many folks like to focus on the mid-week time frame for the low, and most of the time that is when it happens, but my point is, you have to be ready to take your shot any time/day the week before. 2/ When does it peak: Normally the OPEX high is Tuesday close or Wed morning the week of expiry. Then there is some correction into Thursday or Friday morning, and sometime Friday they come close to testing the Tuesday/Wed high. 3/ The Monday after: Normally a post expiration adjustment occurs on Monday. The can be a gap down open or a sell off for a few hours, but the bias is DOWN. After short term indicators start flashing buy traders should start looking long again on Monday. 4/ Flex Wednesday: I do not know who came up with "Flex Wed" but I saw it somewhere many years ago and it stuck. Flex Wed does not have a directional bias, but it does have a whippy or strong directional bias one way or the other. I think the idea behind Flex Wed is that what ever business was taken care of on Monday, the boyz plan on getting repositioned by Wed close. 5/ New variation: The new weekly options are starting to affect the pattern above on Mondays and Fridays. Also note: that a Quad witch expiration usually sees the high about 9am on Friday morning when the last hold outs close out there expiring futures contracts. (happened today Sept 21, 2007) 6/ Delta Hedge Melt Down: Maybe once or twice a year, expiry will go bad, and the market will just sell off, this creates a Melt down since the futures are used to hedge losing option positions. One of the best examples is April 2005. 7/ Summary: If you just look at the last two weeks of action on the SPX, the summary above conforms perfectly. Low Monday at 11:30am, High at 11:20am on Wed, mild correction Thurs, and attempted rally on Friday. Comment: Do they always work, NO, and do the time frames change, YES, but from what I can tell, most of the good traders here see the potential change in trend without the OPEX cycle being part of the plan. You guys have a great weekend, and keep those spectacular subject lines coming. Nearly 100 pts of upside for this OPEX, and probably the best since March 2003, but not percentage wise.

[esther231]

Great information. Much thanks.