Why do Monday Expirations have lower IV than others?

Discussion in 'Options' started by stepandfetchit, Oct 26, 2021.

  1. Monday expirations of SPX are consistently lower IV than other expirations.
    What am I missing? (I am only focusing on SPX initially, but expect this is not unique to SPX)

    I'll post an example in a few minuites.
    trend2009 and morganpbrown like this.
    • A zipped html file attached with 0-30 DTE atm SPX IV for about a week of sampling. -- Note the lower IV of the monday expirations! -- The IV being posted is the ATM IV, so one point per option term per sample time.
    Last edited: Oct 26, 2021
  2. because traders have not recovered from weekend restfulness?
  3. qwerty11


    Because there is less risk of any market movements after a weekend?
  4. Maybe it is just a mean reversion from Friday Iv hype? Could you check if iv on Friday is higher? Traders are uncertain what will happen on the weekend so they push up iv, and nothing happens on weekend so iv comes down?
    qlai likes this.
  5. If you view the html file (zipped), you will observe ALL expirations and can observe that Mondays are consistently lower, with the nearer dated Mondays being lower than others! Friday expiry's are higher! (a period of heavy backwardation would likely be different, but this seems to be the norm). -- Note that the weekend risk is included in the Monday expirations! --- This is even observable with TOS, with their "close-enough for government work" IV derivation.
    Last edited: Oct 26, 2021
    trend2009 likes this.
  6. destriero


    Mark down of the weekend decay on Friday (resulting in a drop in vols). One of the few trades where MMers collude.
  7. Sig


    Doesn't that provide a statistical edge to anyone who buys end of day on Friday's?
    murray t turtle likes this.
  8. Effectively moving money from option sellers to option buyers for weekends? (Option buyers get discounts for the weekend if using Monday Expirys?) Am I getting this correctly?
  9. destriero


    Sure, they're positioned to benefit, generally. I've known a couple of MMers that would come to blows if you mentioned the (collusion) on marking down vol at n-time on Friday. I don't think it's as prevalent/chunky as it used to be in the late 90s/early 2K.
    #10     Oct 26, 2021