Trading Options at Expirations Jeff Augen

Chapter 1 - Expiration Pricing Dynamics Implied Volatility Collapse Strike rice Effects Time Decay Ratio Trades 2:1/3:1 put/call bear/bull spread - cover premium requires a view on where price will be instead of just normal 1:1 spread Chapter 2 Working with Statistical Models Selecting Candidates Collect and analyse minute data for volume stocks eg. Strike crosses, price to strike, ratio Pinning effects Long straddles early in day for expiring stock options earnings calendar week most priced in so long straddle may be expensive Strike price effects and implied volatility collapse dominate Evening before expiration Thursday Larger ratios exaggerates effects of weak trade structures and benefits strong ones Chapter 3 Day Trading Strategies Expiration Thursday Most of option value decay that occurs during these two sessions is related to implied volatility collapse rather than time decay Opening and closing prices do not tell full story. Many instances, underlying stock exhibits transient price swings that are large enough to force conservative investors out of their trades behaviour underscores importance of aggressive stopping out of profitable positions that begin to lose money. Net delta also an important characteristic of an trade Simultaneously profiting from stock movement and volatility decay eg. Bull call - long 1 itm call and short 2-3 itm call at further srike