So, I have watched a short video (https://www.youtube.com/watch?v=lXRAhoNd-50) of Lawrence McMillan talking about trading options on or near expiration. He discuss that arbitrageurs says that they buy their stock on market close and exercise their Calls for cash (about 1:00 of the video).

Now, I want to use MRVL as an example and analysis here. TDAmeritrade shows that MRVL has a 05/24/2019 $23.50 Call option with really huge Open Interest that is x10 factor of all the other options for months to come, screenshot for reference below:

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Now, I have noticed that in the past few weeks (did not go too far in the past) the volume right after closing (4:00PM EST) was significally bigger than the average minute volume. The short table below sums few days as an example:

Data       Volume  /  Avg Vol / Vol Bar Color
05-21-2019 701.50k /  94.02k / G
05-20-2019 762.18k / 123.76k / G
05-17-2019 494.44k /  77.73k / G
05-16-2019 465.97k /  78.79k / R
05-15-2019 438.87k /  67.65k / G
05-14-2019 639.15k /  95.51k / G
05-13-2019 784.84k /  99.39k / G

So the question is, what is the meaning of this repeated 4PM volume? Does it have any connections to Options trading?

2 Answers 2


The video involves traders who are short the OEX stocks and are long OEX calls and it's late afternoon on expiration day (DNW most of video). McMillan's premise is that if the number of ITM calls exceeds 40,000 then they will be placing Market-on-Close orders to buy the stocks at 4 PM, pushing the OEX settlement price up, more so than other indexes. McMillan's arbitrage strategy is to buy 5 OEX calls (1 point = $100) expiring shortly and sell 1 later month S&P 500 futures contract (1 point = $500) because the OEX will rise more than the SPX.

I can't give you any insight into this because I don't trade index options and futures. I will offer that this could be very dated material because McMillan talks about the OEX being at 560 and the difficulty of getting short stocks in the index because of the Uptick Rule. That rule was abolished in 2010 and was replaced by the Alternative Uptick Rule. The last time these two conditions existed was about 15 years ago.

I fail to see what MRVL has to do with any of the above, other than you're witnessing increased 4 PM volume due to MOC orders.

The huge Open Interest number for the $23.50 call is not indicative of anything other than liquidity. You have no idea if the buyer of the calls was bullish (just long the calls) or bearish (also short 100 shares per long call). Or perhaps this was one leg of a spread where the other leg has similarly high Open Interest but you have no way to know if the spread is bullish or bearish.

  • What are MOC orders? May 22, 2019 at 2:49
  • Market-on-Close order May 22, 2019 at 3:42
  • What is the purpose of MOC orders? How common are they? May 22, 2019 at 14:17
  • The purpose of a MOC order is to buy or sell at the last price at the end of the trading day. They are very common and are used by traders as well as ETFs and mutual funds looking to carry out changes to portfolios. The exchanges track and report this info daily and it is reported on various web sites and CNBC. May 22, 2019 at 15:02

There should be such a correlation, but the video shown is largely outdated and difficult to interpolate to the current market conditions. The exercised calls for cash should have an impact on the volume in the exchanges and of course on the market price. That's why it is totally possible that this is exactly the cause of the post-hours volume spike. When traders have exercised options with their brokerage firms, than the brokers should cover these options on the market. I can't say when exactly this should happen, but it is highly likely that this happen after market closing hours when the options execution is confirmed.

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