I decided to test something that I had read about in Jeff Augen’s book Trading Options at Expiration: Strategies and Models for Winning the Endgame
30 Jan 2006 to 30 July 2009 Weekend Returns
In the histogram the labels refer to the hatch mark just to the right of the number.
So the big peak is in the bucket between -0.5% and +0.5%.
So I took prices for SPY from 30 January 2006 to 20 July 2009 to see. Of those 181 weekends, 129 Monday opens were with in one half of one percent of Friday’s close. Not much movement at all, 71% of the time. Another 11.6% of the time, 21 weekends, the move was greater than half a percent but less than one percent. Another 10.5% of the time the move was one to two percent. So the total for a move of less than two percent over the weekend is 93.4%, pretty good odds.
Outliers
The big moves were 6% the weekend of 10-12 October 2008, two returns less than -3%. One of them was the previous month, 12 – 15 September 2008, the other in the middle of February this year. There was a +3% move over the weekend 21 -24 November 2008. So many of the big weekend moves happened last Fall.
So weekends look pretty safe.
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