Re: What does options expiration and triple witching generally do to the market...is there a pattern?
Must Be the Season of the Witch
The wonders of expiration are upon us again, and they never cease to befuddle us. Some of the March expirations in the past have led to true fireworks today and tomorrow, moves that seem totally divorced from the fundamentals.
The longer you trade, the more you will hear various strategies about how to play the expiration.
They're all nonsense. You cannot game expiration. You sure can try. If you have sophisticated modeling and 100% of the calls from 100% of the S&P arbitrage players, maybe you will even have a handle on things.
But you won't make money because things are too random, too out of your control -- or anyone else's, for that matter.
I know, given the magnitude of the impact of expiration, it is worth trying to figure out, say, whether the market will be up today because it was down yesterday. Or it may be worth it to try to figure out where the DRG index or the BKX index will end up and short puts and calls against a particular strike, betting the index goes out at the strike and you clean up.
All I can say is that I have tried these things so many times, with so many excellent brokers and so many good floor looks and with so much help from other pros, and I have never made a dime.
That's why the only real way to play expirations is to look for outsized imbalances and try to move fast enough to get in.
Good luck. We will be racing each other.
Wrong!
Mar 19, 1999
Must Be the Season of the Witch
By James J. Cramer
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