Option-Expiration Week Effect

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation

Gate 1

Survivorship-free

n/a

not a factor universe

Gate 2

Placebo ≥ P95

not run

Gate 3

Cost-aware net

RF n/a

Failedfailed refutation

Did not clear our screen — no tradeable net edge survived modelled costs.

The option-expiration week effect is a calendar pattern: equity index returns during the week containing monthly option expiration are studied for a systematic tilt. The paper documents this seasonal behavior in index returns.

What we found

Tested on SPY, the option-expiration-week calendar effect does not survive our screen gate: there is no tradeable net after realistic modelled costs. The seasonal tilt reported in the paper is too small to clear transaction costs once trading is modelled honestly, so the effect does not become a usable building block in this test. Because it failed the initial cost screen, the further robustness checks (placebo percentile, risk-adjusted RF, worst-year RF) were not run.

How we tested it

2005–2026 test windowmodelled liquidity-aware costssurvivorship na

Tested on the index (e.g. SPY), daily. Realistic modelled costs.
Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)

Source: Stivers & Sun (2013), option-expiration-week returns
Read the paper ↗

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Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.