Trading Options Expiration Days

I had just about decided to stop trading options expiration days when I read Jeff Augen’s Trading Options at Expiration: Strategies and Models for Winning the Endgame (see Another Winner from Jeff Augen for more details), which inspired me to consider a number of potential new options expiration strategies.

As a trader, I am acutely aware that my aggregate P&L for options expiration days is a net loss. It is not just the fact that I have always found it difficult to be consistently profitable on options expiration days that has bothered me, but it has also been the frustration of seemingly having to maintain one set of rules for 240 trading days per year and another set of rules to deal with a completely different set of opportunities and hurdles presented once each month.

The bottom line for me is that it is not worth it to day trade options expirations days and let’s face it, who doesn’t need an extra day off each month. Further, why bother with the day before FOMC announcements, when trading is typically lackadaisical at best? With options expirations every month and FOMC meetings every six weeks, this means 20 additional vacation days a year – perhaps even paid for by cutting trading losses.

I encourage every trader to check their track record on options expirations days and FOMC announcements days to see whether they should be entitled to 20 extra vacation days. Don’t stop at these two slices, perhaps your strategies do not work well on the day before holidays, the week after options expiration, the first week of each month, Wednesdays (crude oil inventories), Thursdays (jobless claims), the day you have dental appointments or whatever.

Not all days are created equal and if your edge isn’t there on certain days, perhaps you should not just step away from the keyboard, but hop in the car and go have some fun with all the money you are saving.