Heg,
I'm no expert in understanding options, so maybe you can help.
We had 3 peaks in the DOW in the 8200-8300 range, occuring in AUG, OCT, DEC. And these peaks were all preceded by a substantial short-term uptrend in the DOW which were at least 600 points. I am assuming that during this uptrend the call volume was very high. Now take a look at how the the market did around expiration time of those months - it was all down.
Now lets take the reverse. After the pullbacks in AUG, OCT, DEC, bottomed out the market started to rebound in each case only about one week before option expiration in SEPT, NOV, JAN; therefore lets assume then that the PUT volume for those months were very high. Then during expiration week the market was up.
Is there some correlation with the PUT/CALL ratio in major monthly trends which would have an effect on the direction during expiration week. The key is, was there a major trend in that month. If there was no major trend then I feel there will be no arbitrage since, but if there was a major trend, then yes whether it was to the upside or downside. Seeya |
