Our Winning Expiration Trading Method

I look for an unusual disturbance in volatility patterns 4-5 days prior to options expiration to tip me off that a tradable expiration move is on the way. This system takes positions at the close of the "tip-off day and holds until the close of the expiration day.

Rules:

• If the range of the day five trading days before expiration day is less than 70% of the average range of the previous three days or is greater than 140% of the average range of the previous three days then an unusual volatility disturbance has taken place.
• Given an unusual volatility disturbance five days before expiration, buy the S&P 500 futures on the close of the unusual disturbance day.
• Hold the long futures position until the close of options expiration day.

We have tested results of trading on a volatility disturbance four days before expiration with very similar results. However, for the record, we will use five days as our model pattern. The expiration system has traded 66 times since 1982. Total net profit of $122,530 has been achieved trading only one lot. Profitability for this model has increased sharply in recent years as the phenomenon has become more pronounced.
The system has also tallied up an extraordinary win/loss ratio of 2.43 and an impressive profit factor of 7.30. You would have been in the market for only 340 days using this model. Therefore, being long less than 10% of the time since the inception of the S&P contract, this model has captured approximately 51 % of the total index points of buy and hold. This statistical
phenomenon is very powerful. If you think likewise, maybe you will conduct your own research into this type of trading.