In preparing to day trade broad-based market securities and indexes during the week of the third Friday of any month, which is often referred to as options expiration week, awareness and knowledge of potentially occurring and repeating broad market futures price patterns and symmetries, which can occur in successive days, may be very helpful to your trading results.
Knowledge of these interesting price patterns and symmetries can aid the lay investor and trader, as well as the seasoned portfolio manager, as they attempt to build the value of a derivative account for trading purposes which can later be used to hedge or insure overall general portfolio value among the investor’s holdings.
Powerful trading results can occur from recognizing and utilizing this important knowledge. The day- to-day price symmetries which occurred during the May 2012 option expiration week, and the related strategies and instruments used to take advantage of this occurrence, in real-time, is presented and highlighted in this article.
To start, it is important to recognize the relational link among months a quarter apart. These quarterly separated months often comprise and reflect certain ‘associated’ focus interest price points within this market ‘periodicity’. An example of a full “quarterly month set” within a calendar year would be the ‘quarterly reflection month set’ comprised of the month of February, the month of May three months later, the month of August another three months later, and finally the month of November three months after that.
February, May, August, and November would constitute one of the three ‘quarterly reflection month sets.’ that occur each year. Using key quarterly reflection month sets and precisely corresponding quarterly echo-back days and quarterly echo-back time points provide the key starting framework for vector price symmetry analysis.
Using these notions of periodicity, price-time association, echo-vector price symmetries, and statistical observation, it can be further discovered and recognized that active advanced position management opportunities, occurring at key times, on key days, within key broad market futures daily price symmetries, and within key price-time echo-vector coordinations, may also occur. My focus in this article is on presenting their potential occurrence, and a strategy to take financial advantage of this occurrence, during options’ expiration week within these key reflection month sets. Familiarization with these specific daily price sensitive and time sensitive echo-vector reflections and price symmetries may aid your forecasting and investing technique; and, with knowledge of additional active advanced trade positioning strategies, can further frame up your considered approach to the market during these potentially opportune trading weeks.
What follows is an example of this opportunity as it unfolded in real-time in May 2012: This example presents an important analytic framework and trading strategy that may be useful in helping to prepare the advanced active trader or advanced active portfolio manager for the approach of the May 2013 major options expiration week three months out from last week’s major February options expiration week:
There are three quarterly echo-month time period sets within each year, each with four quarterly reflection months within each time period set within each year. The three quarterly echo-month time period sets in each year are designated: 1. January, April, July, and October (the JAJO month set); 2. February, May, August, and November (the FMAN month set); 3. March, June, September, and December (the MJSD month set). This article’s example therefore involves the echo-month time period set of February, May, August, and November (FMAN set).
(Interestingly, this set follows the often volatile and highly-studied and most-referenced ‘earning season months’ set in each year; being, January, April, July, and October (the JAJO month set).
The FMAN months occur when the stock market transitions from typically being mostly ‘earnings announcement sensitive’ to often instead being more focused and sensitive to ‘domestic macroeconomic data and international political economic events.’ What is particularly interesting about proceeding into options expiration week in the FMAN months are the daily symmetries and echo-vector coordinations that often occur during options expiration week within this set of months. Awareness of these symmetries can aid the short-term forecaster and nimbly active advanced trader or portfolio manager in building capital value within a derivative fund account; value which can then be used to hedge the value of a general portfolio account in possibly volatile market periods that may be forecast later. I published much information in May 2012 on the Dow 30 Industrial Composite futures and the S&P 500 futures to inform investors, managers, and traders of this and related phenomena, in order to keep them ahead of it, and to provide them with modeled knowledge and trading knowledge to potentially take capital advantage of it.
In this article I include a chart illustrating the key and repeating Wednesday/Thursday/Friday time-point symmetries and corresponding daily echo-vectors that played out in May 2012. I have also included a ‘time and price coordinated’ chart of the selected PUT option, the SPY May 19 2012 132 PUT, used in the model as a hedge and short-term trading instrument in the market price short(down)-side trade tactic. This PUT was selected to illustrate the capital gain capture potential within the model of the active advanced trade management and day-trading trade tactic exercise-able during these three days during this example major options expiration week.
Basic ‘time premium assuming’ buy-to-open and sell-to-close entries and exits into this PUT option rider vehicle during this key three day relatively price-symmetric focus trading opportunity period, in this key week, of this key month, within this key set of months, are highlighted are highlighted in the charts. So are the powerful gain differentials.
Beyond using this more straightforward trade strategy and tactic, and trading instrument basket, more advanced, active and nimble derivative traders and fund managers may also elect to potentially ‘amplify’ the capital gain capture potential of this overall strategy by instead utilizing a parallel but more advanced ‘sell to open’ short positioning basket strategy and tactic in order to also collect time premium value through position hold attrition, rather than assume time premium decay it within the buy-to-open held position. (This alternate yet correlate strategy and tactic presents additional risk management considerations, and risk-limiting protocols and measures, to effectively and efficiently employ.)
Concomitantly, also employable in this overall general strategy, yet ‘inverse’ to using the SPY PUTS in a buy-to-open and sell-to-close application regime during key application ‘exit and entry position switching moments’ is the inverse yet correlate SPY CALL application tactic. Adding this feature of also buying or selling, to open or close, at these same key moments as trading the PUT, but in the inverse yet position-ally and direction-ally value-appreciating way, is the most advanced of these trading instrument baskets, strategies, and tactics, and would also compound and increase overall potential yields dramatically.
The May 2012 example I have presented in this article and illustrated in the provided charts evidences the powerful possibilities and potential advantages of technical market analysis and active advanced, position management and value optimization techniques, with a focus on intra-day echo-back date and echo-back time symmetries within precision echo-vector analysis and market price motion dynamics. These three key associated days, within this key month, within this key set of associated months, may potentially offer this like opportunity in 2013. And effectively utilizing the kinds of highly powerful derivative investment instruments in the model presented here, along with appropriate protective hedging techniques, may potentially advance the capital value of a derivative fund account. Additional value thus captured may then be further used at a later time by the investor to hedge the value of his or her general and primary portfolio account during volatile market times.
This article is scholastic and for informational purposes only.There are risks involved with investing including loss of principal. We make no explicit or implicit guarantee with respect to the performance or the outcome of any investment or projections or conclusions presented or discussed or implied by us in this article.There is no guarantee that the goals of the strategies discussed here will be achieved.
Again, this article is for scholastic and informational purposes only.
Before making any investment decisions we highly recommend you first consult with your personal financial adviser regarding your personal investment situation and goals.