Bank Nifty weekly expiry options has been introduced in the year 2016, since then many traders began to speculate with option trading especially on expiry days by buying OTM options with an expectation of seeing huge gains.
We have analysed the historical data to find out how Bank Nifty moved on expiry days. As you can see in the below chart, most of the time Bank Nifty ended the expiry day with flat movement, there are very few days where bank Nifty moved more than 1% from its open price.
The movement is calculated based on Close — Open price for the expiry days alone.
Here’s the statistical data of Bank Nifty expiry days. The average intraday % returns on expiry days is just 0.03%, which means on expiry days, the markets are closing near the open price itself, which means that all options strikes that are above/below 0.5% or 1% from spot price expire worthless. And it provides huge opportunity for option sellers, where they write options in huge quantity on expiry days and make enormous profits, after all stats are in their favor.
This could be due to low volatility environment that are in low, and more retailers are into option selling, as decay is higher on expiry days, many people are selling Options these days and especially on expiry days.
There were only 19 expiry days out of 107 expiry days, where bank nifty ended up with more 1% movement, which is just 17% of the time.
Based on the above data, we could conclude that option selling is more profitable on expiry days and easy way to make consistent returns, provided if you are able to hedge your positions or control your losses during the wild movements observed in couple of expiry days. As we have 4 to 5 expiry days in a month, many traders end up making higher returns by selling options on expiry days alone.
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