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Sunday, June 17, 2007

Triple Witching Day Closings: This is Strange

When I was reviewing the closing prices of several stocks for last Friday, June 15, I noticed that NYSE Euronext, Inc. (NYX) closed at exactly 80 per share, not 80.01 or 79.99, but 80.00 right on the dot. I thought it was kind of unusual that the stock closed on triple witching day exactly on the strike price, especially since the stock closed above 85 just ten days earlier. Triple Witching Day is when options, index options and futures all expire on the same day, which in this case was last Friday.

If the stock is trading somewhere between the strike prices of 80 and 85, and you are wondering what the odds of the stock ending up at one of those strike prices versus somewhere in between, it is two out of 501, or less than four tenths of one percent of that happening. And if you include the possibility that the stock might have closed somewhere between 77.50 and 87.50, then the odds of the stock closing exactly at either of the two strikes is extremely small. Was there something going on with NYX or was it just a lucky chance that the sellers of the 80 calls had those calls expire totally worthless right down to the penny?

Other stocks that closed right on the strike price down to the penny last Friday include Autodesk Inc. (ADSK) at 45 and Freddie Mac (FRE) which closed at 65.

Author owns NYX.

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