Friday, April 27, 2007

The VIX on Mondays After Options Expiration

A reader asked me what usually happens to the VIX on the Monday following options expiration.

The short answer is that since 1990, the VIX has risen an average of 2.9% on the Monday after options expiration. Looking at all five days of the week, the VIX has posted a mean daily increase of 0.16% since 1990. If you back out those Mondays following options expiration, however, the remaining increase is a mere 0.02% per day, meaning that these post-expiration Mondays have accounted for almost all of the cumulative upside movement in the VIX over the past 17 years.

For what it’s worth, I also looked at the subset of Mondays following quadruple witching days and determined that those results were statistically identical to the other post-expiration Mondays.

One statistic that I found particularly interesting is that 80% of the VIX gains on typical post-expiration Mondays and 90% of the gains following quadruple witching expirations are, on average, reversed in the course of the next three days. So the next time you see a post-expiration bump in the VIX, expect that by the following Thursday almost all of the move will have evaporated.

For more on the VIX action on Mondays, Fridays, and during the options expiration cycle, click on the appropriate label links at the bottom of this entry.


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