Option prices at day’s open and close are distorted by institutional mechanics

Evidence

Thus, Rubinstein had to analyze not “raw” prices of options, but weighted averages. He also filtered out large numbers of price records that he regarded as problematic. For example, he excluded any record that referred to either the first or the last 1,000 seconds of the options exchange’s trading day. He removed transactions close to the start of the day because they often reflected the “execution of limit orders” held over from the previous day.” He eliminated those in the final minutes before the close of trading because prices then were influenced by “trades to influence market maker margin” (1985, p. 463) in other words, the level of deposit that had to be maintained in order to be allowed to continue holding a position. — Donald MacKenzie, An Engine, Not a Camera, 105

Categorization

• SHARE: A specific person into options market microstructure would enjoy the concrete detail about limit-order carryover and margin-maintenance trades distorting prices at day boundaries.
• XREF: connects to: Option contract mechanics link price quotes to fixed share multiples. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1408