Trading the Odds

A statistical approach to profit in the US equity markets, trading the markets like professional card counters are playing Blackjack or expert poker players are playing Poker.

S&P 500′ Historical Intraday Performance on Option Expiration


For those who love the numbers, the table below shows the S&P 500′ intraday performance stats on option expiration Fridays since 01/02/1990 (open, high, low and close in comparison to the session’s close immediately preceding option expiration, almost always Thursday).


Is is notable that option expiration’s session itself is not an especially favorable time frame for the market, at least not in comparison to an average session and the respective at-any-time probabilities and odds.

On option expiration the SPX historically did not post a high above the previous session’s close as often as it -on average- did on an randomly chosen session (82.40% versus an at-any-time probability of 86.80% for a high above the previous session’s close), and the average winning trade on the close shows a profit of 0.63% compared to an at-any-time profit of 0.77% on a higher close. The profit factor as the sum of all profits divided by the sum of all losses with 0.87 on option expiration (that means one only would have won $0.87 for every dollar lost on option expiration) compared to an at-any-time profit factor of 1.07 clearly shows that -although option expiration week (!, not the session itself) represents a favorable time frame for the market- it regularly (in the long run) does not pay going long the SPX on close of the session immediately preceding option expiration’s Friday.

That DOES NOT mean that we won’t see a positive close on Friday’s session, but if you’d have always bought the SPX on close of the session immediately preceding option expiration and closed the trade on close of option expiration, you’d have lost money and fared worse compared to a ‘buy and hold’ approach or investing randomly with a one day investment period.

The following figure shows the SPX‘ (bell curve) distribution of profits and losses on option expiration (end-of-day gains/losses), and listed below are the intraday performance stats concerning option expiration’s session since 2003. The bell cure is slightly right-skewed, which means a bigger part of the distibution is concentrated on the left side (losses) of the distribution, which is also reflected by a profit factor below 1.



Successful trading,


P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).

Disclaimer: Long BGZ (Daily Large Cap Bear 3x Shares) at time of writing.

Filed under: Studies/Survey, , , , , ,

5 Responses

  1. moneyfriend says:

    Thank you Frank, I think this would be more relevant if you split the study up in to times when the opex is below the 200dma and times when it is above, or maybe in relation to rsi14, for example.

    • Frank says:


      thanks for the idea, but from my perspective that wouldn’t make sense at least concerning this study (but may be relevant for other studies).

      Why should especially the 200dma and/or 14-day RSI increase the relevance of the study (isn’t it already relevant enough utilizing the pure data only ?), or why should any indicator at all should be added in order to increase the relevance ? There is no ‘magic’ behind the 200dma or 14-day RSI, and I could as well chose the 20day EMA and/or 2-day RSI (instead of the 14-day) and/or any other indicator and respective time frame until I come up with something which seems to provide a significant edge (although the sample size then would be very small).

      The study should provide an analysis taking into account the pure (unbiased) intraday performance on option expiration only, and I almost always take into account pure data like price (open, high, low and close), breadth (Advancing and Declining Issues, Advancing and Declining Volume, New Highs and New Lows) and index out-/under-performance in comparison to another (sector) index over time only, because any indicator (SMS, EMA, RSI, CCI, Stochastic, McClellan and and and) is nothing else than a first or (even worse) higher derivation of pure price and breadth data (you could as well use the pure data -e.g. closing prices- as well instead of the RSI/CCI/…, but that would sometimes make things a ‘bit’ more complicated from a mathematical and handling perspective), and using any kind of (higher derivated) indicator will get you further and further away from the pulse of the market (it should be obvious that I’m not a friend of any kind of complicated indicator).

      The samle size is small enough (1 occurrence out of every approximately 21 session), and from my perspective any additional differentiation would not increase the relevance but would significantly further decrease the sample size (and the respective quality of forecast).

      I sometimes use an SMA/EMA in order to differentiate between different investment cycles (e.g. bullish or bearish time frames), and/or e.g. Wilder’S DMI in oder to visualize in a single number if an index is trending or sideways trading, or in oder to build up a mechanical trading system, but not in order to determine probabilities and odds for the next session’s outcome (leave alone any intraday performance).

      Concerning this survey something like ‘What happens on option expiration if the SPX is already down -x% for the week ?’ would make more sense -just my take-.

      Best regards,


  2. moneyfriend says:

    I have found in my own backtesting that separating the results in to 2 groups group 1: > 200 dma, group 2 < 200dma, often reveals very different results between the 2 groups. I like seeing the results for both groups separate and also together. I agree it is good to see the pure results as well.

  3. moneyfriend says:

    I think it is relevant as well because opex relates to the max pain effect, and max pain price often correlates with a 40 day moving average for instance. Thanks for the great work you share here.

  4. Peter says:


    Interesting that there is an 86.8% chance of a high above the previous days close. Actually, the average since October 2007 is 12.2 S&P500 points higher. How about buying at close and setting a stop-limit order for the next day to sell at closing price + say 8 points?

    The problem of course is limiting the downside when the limit order fails to trigger. Like 26th September 2008, the limit never triggers and the close to close is down 106 points. Still, food for thought!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Twitter Updates

  • w/ 18.30 at time of writing, the gap between $VIX and $VSTOXX is close to its all time closing low of 19.90, posted on 10/16/2008. 3 years ago
  • The $VIX gained 48.33% over the course of the last week. Since 1/2/1990 there were 38 other occurences w/ $VIX gained > 48% over 5 sessions. 4 years ago
  • On Friday iShares MSCI Brazil Capped ( $EWZ ) closed at 19.09 , a 11+ year low and its lowest level since 11/08/2004. 4 years ago
  • On Friday the Russell 2000 Index ( $RUT ) closed at 1,046.20 , a 2+ year low and its lowest level since 10/09/2013. 4 years ago
  • @QuantStratTradR Sorry, I didn't follow the entire communication. Link to what ? // @easyvolatility 4 years ago


The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website, including the information that others post here.

While every effort will be made to provide complete, the most accurate and current information, none of the information on this site is guaranteed to be correct, and anything written here should be subject to independent verification. I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this blog or the information, analysis, statistics, or related graphics contained on the blog for any purpose.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

Please read the full ... DISCLAIMER


May 2009
%d bloggers like this: