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Options Expiration Day Is No Day to Trade


Review your track record -- then step away from the keyboard.

I'd 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 this article for more details). It inspired me to consider a number of potential new options-expiration strategies.

As a trader, I'm acutely aware that my aggregate P&L for options expiration days is a net loss. It's not just the fact that I've always found it difficult to be consistently profitable on options expiration days that's bothered me. It's 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's not worth it to day trade options expiration 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 6 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, too, should be entitled to 20 extra vacation days. And don't stop at these 2 slices. Perhaps your strategies don't 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 only step away from the keyboard, but hop in the car and go have some fun with all the money you're saving.
No positions in stocks mentioned.

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