We have previously talked about the disservice you may do your shareholders if you radically alter the information equation around options expirations. This also applies to transitions from one month to the next. Just as some highly successful trading firms – Citadel Derivatives and Renaissance Technologies come to mind – employed “outside the box” thinking (how I despise that tired phrase, but it’s still more descriptive than alternatives) including principles of mathematics and geographic formation rather than, say, financial-markets conventions, so must the effective and proactive IRO of today consider how news at the beginnings of months may affect available liquidity (the major concern in the markets today).



Month-to-month, programs behind trading strategies typically undergo tweaks and updates. We are seeing those effects today in the markets, for instance, with programmed adjustments to indexed vehicles and asset-allocation models taking effect and pushing the indices down. This means there is an overall reduction to equity positions occurring in early February and an increase in derivatives trading, a condition likely to prevail until four days before options expirations.

Now, suppose you had news to report about products, or contracts, or cost-cutting efforts and so on. As a rule of thumb, it’s better to wait about three trading days into the new month – when and where disclosure flexibility allows – to release these news items. By doing this, you give investors a chance to absorb additional information and appropriately incorporate it into risk-management strategies (everybody uses them, not just hedge funds). If you don’t, you may wrinkle the math behind them, which could result in greater hedging and reductions to equity positions (which are simply assets that derivatives strategies “insure,” we might say). Why scramble the equations and do your shareholders unintended ill when you have the flexibility to avoid it?

Of course, it is not always possible to delay the release of news. But when you have the option, it’s simply part of responsible investor relations in Reg NMS markets to consider the ramifications your news may have on risk-management strategies. This is yet another reason why IROs belong at the strategic table.