Stock price clustering on option expiration dates

Sophie Xiaoyan Ni, Neil D. Pearson, Allen M. Poteshman

Research output: Contribution to journalArticlepeer-review


This paper presents striking evidence that option trading changes the prices of underlying stocks. In particular, we show that on expiration dates the closing prices of stocks with listed options cluster at option strike prices. On each expiration date, the returns of optionable stocks are altered by an average of at least 16.5 basis points, which translates into aggregate market capitalization shifts on the order of $9 billion. We provide evidence that hedge rebalancing by option market makers and stock price manipulation by firm proprietary traders contribute to the clustering.

Original languageEnglish (US)
Pages (from-to)49-87
Number of pages39
JournalJournal of Financial Economics
Issue number1
StatePublished - Oct 1 2005


  • Hedging
  • Manipulation
  • Option expiration
  • Stock price clustering

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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