‘Twas the Night Before Expiration – A Holiday Tale

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‘Twas the night before expiration, when all through the floor
Nothing was trading, not even a Condor
My trades were placed electronically with care
In hopes that a market maker would soon be there
Gutsy traders all snuggled in their big brass beds
While visions of arbitrage played out in their heads
Eileen in her flannels, and I in my Sox cap
Had just logged off my platform in time for a nap

When on CBOE-TV there arose such a chatter
I sprang to my laptop to see what was the matter
A DRJ Report came on with a flash
“I hope you have puts, this market’s gonna crash”!
His news keeps me abreast, that’s why I like the show
Insight like this screams “look out below!”
When, what to my greedy eyes should appear
But a VIX Index at 80, indicating mass fear
Signed back onto my platform, so lively and quick
I knew in a moment, SPX puts are the trick

More rapid than runners, option orders they came
Into the pits, brokers calling them by name
“How’s AAPL!  Now GOOG! Now CREE! and VIX!”
“Give me a market in AMZN, SPX and NFLX!”
To the top of the pits, to the markets on the wall
“I’ll buy your puts, I’ll buy them all!”

Out-of- the-money puts bought last week on the fly
Have ballooned with volatility, I’m selling them high
As lofty as the Sears tower, my P&L grew
After selling my puts and the long vega too
And then in a twinkling, I shouted “I LOVE MY LIFE”!
Eileen heard it differently; she thought I said “WIFE”!
As I drew in my head, and was turning around
Down the bannister she slid, “WHERE’S THE MONEY YOU HOUND”?
She wanted Hollywood gowns from her head to her foot
To wear on ocean front property she saw in a book
Like a hunter I flung her, on my green back
Upstairs we went and started to pack

Other traders I’m sure were not quite so merry
A burnt out and broke market maker can be so scary
Missing teeth with a face drawn sullen and low
Aged beyond repair and out of dough
The stump of a pencil held tight in two teeth
Paper on the floor encircled his head like a wreath
He has skinny legs and a big beer belly
That shakes when he cry’s like a bowl of spaghetti
He was once a shiny, bright eyed, jolly young guy
And I laughed when I saw him in his lucky tie
A quick hand signal and a twist of his head
Let other traders know when he was close to dead

But the broker spoke few words and went straight to his work
To fill all the orders with that market maker jerk
And laying his finger aside of his nose
And giving a nod, to the next pit he goes
He sprung into the crowd, to the traders gave a whistle
After the trade they all covered, from the down of a thistle
Then the bell rang and the traders were clear out of sight
Expiration is finally over and to the market good night.

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Peter Lusk

Peter B. Lusk is an instructor at the Options Institute, the educational arm of the Chicago Board Options Exchange. He teaches option courses for public and institutional traders and has contributed educational type articles to various financial publications. Peter has spoken to thousands of investors across North America the…