Does Short-dated Options Introduction Mitigate Expiry Day Effects? Evidence from the Introduction of Weekly Index Options

Kotha Kiran Kumar


High volatility in the stock market is often attributed to derivative expirations. The National Stock Exchange of India, largest derivatives exchange in the world by number of contracts traded, introduced weekly or short-dated derivatives in Feb 2019 to mitigate the expiration day effects. The study empirically examines the return and volatility data surrounding expiration days during the period before and after the introduction of weekly derivatives. First, for the period before the introduction of weekly contracts, the study gathers empirical evidence suggesting the presence of upward shift in price effects around expiration day and a transitory upward shift in volatility. Next, the study shows with a comprehensive time series analysis, these adverse expiration day effects disappear in the period after the introduction of weekly options. The paper concludes that the weekly, short-dated, contracts fill the gap in the market depth and are beneficial to the over all market welfare. As the weekly options are gaining popularity across the exchanges and investors, the study has important implications to the regulators and practitioners around the world.

Keywords: Volatility, Expiration Day, GARCH.

Full Text:



Andersen, T.G., Fusari, N., & Todorov, V. (2017). Short‐term market risks implied by weekly options. The Journal of Finance, 72(3), 1335-1386.

Bhumika, S., & Bose, S. (2007). Impact of derivatives trading on emerging capital markets: A note on expiration day effects in India. William Davidson Institute. Working Paper Number 863, March 2007.

Bollen, N.P., Whaley, R.E. (1999), Do expirations of Hang Seng Index derivatives affect stock market volatility? Pacific-Basin Finance Journal, 7(5), 453-470.

Bollerslev, T., & Wooldridge, J.M. (1992). Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances. Econometric reviews, 11(2), 143-172.

Cinar, E.M., & Vu, J. (1987). Evidence on the effect of option expirations on stock prices. Financial Analysts Journal, 43(1), 55-57.

Chen, C., & Williams, J. (1994). Triple-witching hour, the change in expiration timing, and stock market reaction. Journal of Futures Markets, 14, 275–292.

Hancock, G.D. (1993), Whatever happened to the triple witching hour? Financial Analysts Journal, 49(3), 66-72.

Kamaiah, B. and Sakthivel, P. (2008) Futures Expiration Day Effects on Spot Market Volatility: Evidence from the Nse. The Asian Economic Review, 50.

Kan, A.C. (2001), Expiration-day effect: Evidence from high-frequency data in the Hong Kong stock market. Applied Financial Economics, 11(1), 107-118.

Karolyi, G.A. (1996), Stock market volatility around expiration days in Japan. Journal of Derivatives, 4, 23-43

Klemkosky, R.C. (1978). The impact of option expirations on stock prices. Journal of Financial and Quantitative Analysis, 507- 518.

Nandan, T., Agrawal, P. and Bhargava, S. (2014) Mispricing in CNX Nifty Futures: An Empirical Investigation. Asia-Pacific Journal of Management Research and Innovation, 10, 413-422.

Officer, D., & Trennepohl, G. (1981). Price behavior of corporate equities near option expiration dates. Financial Management, 10, 75-80.

Oikonomou, I., Stancu, A., Symeonidis, L., & Simen, C.W. (2019). The information content of short-term options. Journal of Financial Markets, 46, 100504.

Prachi Jain and Kiran Kumar (2022), Does Options Improve the Information Absorption? Evidence from the Introduction of Weekly Index Options, Forthcoming in International Review of Finance.

Stoll, H.R., Whaley, R.E. (1987), Program trading and expiration-day effects. Financial Analysts Journal, 43(2), 16-28.

Stoll, H.R., Whaley, R.E. (1991), Expiration-day effects: What has changed? Financial Analysts Journal, 47(1), 58-72.

Stoll, H.R., Whaley, R.E. (1997), Expiration‐day effects of the all ordinaries share price index futures: Empirical evidence and alternative settlement procedures. Australian Journal of Management, 22(2), 139-174

Vipul, V. (2005), Futures and options expiration-day effects: The Indian evidence. Journal of Futures Markets, 25(11), 1045.

Wen, Y. (2020). How Do Options Affect the Volatility of the Underlying Equity Market? Evidence from the Introduction of Weekly Options. The Journal of Derivatives, 27(4), 89-107.


  • There are currently no refbacks.

Copyright (c) 2022 International Journal of Business and Economics

© 2016-2023 International Journal of Business and Economics (IJBE)

ISSN (online) 2545-4137

Disclaimer: Articles on International Journal of Business and Economics (IJBE) have been previewed and authenticated by the Authors before sending for the publication. The Journal, Chief Editor and the editorial board are not entitled or liable to either justify or responsible for inaccurate and misleading data if any. It is the sole responsibility of the Author concerned.