Quirky Option Calendars - Over Time

By Frank Walsh

Labor Day Weekend has once again come and gone, and the leaves are already beginning to fall in the Northwoods of Wisconsin, where we spend our summers. 

Being in the time-sensitive options game for most of our working life (45 years) has forced us to constantly be aware of the calendar, and the time "quirks" that sometimes arise. 

We will soon be heading back to Arizona; it's earlier market hours, and Labor Day always makes us leery of the soon-to-be 5:00 AM Arizona-time wake-ups. When we began working on the CBOE (1976), never leaving Chicago meant for fewer calendar/time zone oddities. At that time only having exchange-listed quarterly call option series also created less trade/option position-related idiosyncrasies.

Then came Leaps (long terms); followed by monthly series, all leading to the current weekly and tri-weekly (Monday/Wednesday/Friday) cycles. 

The M/W/F cycles are even "quirkier" when there is a holiday (this week), that creates a one-day (Tuesday to Wednesday) rolling opportunity. The option powers-that-be (read: the exchanges) have been discussing the possibility of daily series for years.

The closed-for-trading days (holiday Mondays and Fridays) give these exchanges, their computers, and their customers the opportunity to experience daily-like cycles, and any subsequent position adjustments (rolls). 

We began by talking about the time-sensitivity in options trading, and the calendar oddities sometimes associated in their trade and adjustments. Well, the option calendar quirks have multiplied over time, so to speak, and moving from the old days of 4-times a year series to possible dailies has changed the game as dramatically as anything in the investment industry. And we have lived through them all. 

What to look for when deciding between days, weeks, months, and/or quarterly adjustments?  THAT is a topic for another day. 

"Oh the times they are a-changin'..." - Bob Dylan 

FHW (fhwoption@hotmail.com)