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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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To: rcksinc who wrote (43900)11/18/2021 5:23:24 PM
From: Sun Tzu1 Recommendation

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rcksinc

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Index options are primarily used by pros to hedge their position (yes, there is a ton of retail players in the market now, but even so). Most index options roll forward. Meaning that rather than closing or exercising your options this week, just swap them for next week's + some fees. The net effect is that the market maker has to consider these new positions and hedge his book accordingly.

So yes, I absolutely agree that we are not going to have a 5% drop tomorrow. But the eyeball method has its limitations in that it doesn't consider the roll forward. Unfortunately, I've been unable to find a historical source for options data. So the only way to tell what is going on there is to take multiple snapshots and do the math.

On the options expiry date, especially if there is a heavy volume, you can feel the effect of roll forward on the index, especially after lunch.
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