How ‘OpEx’ Is Shaking Up the Third Week of the Month

Since January, U.S. stocks have lurched lower in the third week of most months. That happens to be in the run-up to the date on which most stock options expire, the third Friday of the month. While it’s not guaranteed to happen again, the turbulence around this event -- known colloquially as OpEx, for options expiration -- has become a source of fascination to many market observers, because it upends the traditional relationship between options and their underlying assets. What it suggests is that the stock market has effectively become a derivative of its own derivative -- a tail wagging its dog.

In July, the S&P 500 lurched 2.3% lower over two sessions through the 19th. In June, the index had its largest drop on the 18th. April saw the benchmark swoon for two days from the 19th to the 20th. In February, it fell four days in a row through the 19th. The pattern was reprised in August when equities had their biggest slide of the month on the 17th and 18th.