The Big Expiration
Four times a year, the world's most important derivatives transactions have mayor expiry dates. It's the third Friday of the last month of the quarter.
There are Numerous futures contracts on a major expiration day. There are three types
of derivatives that expire: options on individual stocks, options on indices and futures on indices - hence the name Big Expiration. On the "small expiry date", only the options on stocks and indices become due. There is a "small experation" every month, on the third Friday of each month.
In order to simply benefit from the big expiry, we open a long position in the S&P 500 or the DAX on Monday evening in the expiry week. We will sell our position again on Friday evening. We do the whole thing four times a year. In March, June, September and December.
Implementation could be achieved with a Future (e.g. SPX) or Contracts for Difference (CFD`s).
Finance professionals, of course, know the importance of this day. The high financial resources at their disposal allow them to drive the markets in the direction they consider beneficial for a period of time. Which is the most advantageous direction depends on the objectives of the major players in the futures market.
The maximum pain theory is particularly important in this context. Institutional investors are usually long stocks in their basic portfolio. To improve the return in trendless phases, write call options and thus act as writers. These so-called covered purchase options (covered calls) expire on the third Friday of the last month in the quarter as described above. If the markets rise in the run-up to expiry, the covered calls must be hedged with long futures.
This table shows these expiration dates through 2022