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Opex effects

The recurring market behaviours around monthly options expiration: pinning into Friday, elevated volume, and a change in character the following week.

Three mechanisms overlap. charm forces hedgers to adjust deltas as expiring options decay; pinning pulls price toward strikes with heavy open-interest; and once the expiring contracts are gone, the dealer-gamma that was damping moves disappears with them.

That last point produces the most cited pattern: the week after a large expiration often sees wider ranges, simply because a stabilising hedging flow has been removed. The effect is statistical and modest, and it is routinely overwhelmed by news.

Example: XYZ grinds in a $0.40 range all week and settles at $50.02 on the third Friday with 30,000 contracts at the $50 strike. The following Tuesday it moves $1.80 on no obvious catalyst. Nothing changed about XYZ; the hedging that had been absorbing flow expired.

Related: opex, pinning, dealer-gamma, triple-witching

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