Returns and option activity over the option-expiration week for S&P 100 stocks
Chris Stivers and
Journal of Banking & Finance, 2013, vol. 37, issue 11, 4226-4240
For S&P 100 stocks, we find that the weekly returns over option-expiration (OE) weeks (a month’s third-Friday week) tend to be high, relative to: (1) the third-Friday weekly returns of other stocks with less option activity, (2) the own stock’s other weekly returns, (3) the risk, based on asset-pricing alphas. For these same stocks, a month’s fourth-Friday weekly returns underperform modestly. We suggest the following two avenues are likely partial contributors towards understanding these return patterns: (1) delta-hedge rebalancing by option market makers, with a reduction in short-stock hedge positions over the OE week, and (2) declining risk perceptions over the OE week, as measured by option-derived implied volatilities. Our findings suggest option activity can induce reliable patterns in the weekly returns of option-active large-cap stocks.
Keywords: Option expiration; Stock returns; Option delta hedging (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:11:p:4226-4240
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Dana Niculescu ().