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Potential Drivers of Index Option Price Jumps Near Large Expiries

Article Quant Q&A · Author: J19
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Summary

The document frames a research question about abrupt changes in index option prices near major expiration dates. It proposes systematic rebalancing by structured products as a possible source of price pressure and asks what other forces might contribute. The material is an investigation prompt rather than an analysis: it provides no evidence, data, tested hypothesis, pricing model, or identified additional drivers.

A researcher could use the question to examine whether expiry-related hedging activity coincides with unusual option price moves, while distinguishing that mechanism from other expiry effects. Any conclusion would require defining the relevant index options and large expiries, measuring price jumps, and testing the timing and direction of hedging flows against alternatives. The document itself does not establish that structured-product hedging causes jumps or that the effect is systematic.

Key ideas

  • Structured-product rebalancing is proposed as a possible source of index option price moves near large expiries.
  • The document poses a research question and provides no empirical evidence or results.
  • Testing the hypothesis requires defining expiries and price jumps and measuring related hedging flows.
  • Other potential drivers are left unspecified and would need independent investigation.

Tags

OptionsMarket microstructureEvent-drivenDerivatives pricing
Full text
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# Are there noticeable jumps in index options price due to systematic hedging of structured products close to big expiry dates?












I am looking at investigating factors that will cause jumps in index options prices close to big expiries in the name. I imagine systematic rebalancing of structured products will have a large impact but I'd be interested in hearing if there are other factors that would cause this kind of behaviour.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.