Quarterly OpEx triggers market trend reversals
The speakers argued that the upcoming quarterly options expiration (OpEx) acts as a major turning point where market performance tends to flip directions.
The argument
As large options positions expire, the associated market maker hedges are unwound, which historically reverses the prevailing trend about 60% to two-thirds of the time. The effect is compounded by VIX expiration and the FOMC meeting occurring on the same day.
The thesis, stress-tested
✓ What validates it
- ✓S&P 500 reversing its pre-expiration trend immediately following June 18th
- ✓Volatility expanding or contracting sharply post-expiration in line with historical regimes
▸ Risks discussed
- ▸Holiday-shortened week alters typical time decay dynamics
- ▸Macro events like geopolitical resolutions could override typical flow dynamics
Hear it yourself
"There is a big Iran signal that came yesterday at Trump's tweet. Fall really dropped because of that. We're supposed to get a deal signed this weekend, but, you know, who knows? And so that's just another piece of this pie. If the Iran deal isn't real, you know, that's gonna that's gonna hit the market, I think, harder, you know, the more we keep going here. So obviously, we we love Brent's conspiracy corner, and, obviously, you've had some conspiracies that the idea was Iran had to be settled to get the SpaceX IVO out. So we we had to make sure we had to make sure SpaceX didn't come out into a bad environment, so we we found a way to, at least a proposed deal right to it here."
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