Friday weekly options and the afternoon pin

[Fairman]

Friday weekly options and the afternoon pin

Weekly options expire on Fridays, and short-dated ones expire daily. When large strikes cluster near the current price, hedging flows can pin the market.

The mechanics resemble the New York cut discussed elsewhere, but weekly expiries add their own flavor. By Friday afternoon, a lot of option positions are near expiry, and their sensitivity to price, the gamma, is at its peak. Dealers hedging them have to buy and sell in small amounts as price moves, which dampens the movement.

The result is a market that feels strangely stuck late on Friday, with price hovering around round-number strikes and mean-reverting on every push.

After the expiry passes, the pin releases. Monday often brings a new range.

Data providers publish estimates of large option strikes and notional amounts. These are rough, but they show where the biggest clusters sit.

For scalpers, a Friday pin means smaller ranges and a favorable environment for fading small moves, with the caveat that a big news event can break it.

Late on Fridays, which strikes seem to act as magnets on the pairs followed?

[FXS London Scalper]

By Friday afternoon, a lot of option positions are near expiry, and their sensitivity to price, the gamma, is at its peak.

Weekly expiries on Friday can pin a pair near a large strike in the afternoon. Checking the expiry lists in the morning explains why price sometimes stalls at a level for hours.