Conversions and Reversals

Conversions and Reversals
every last but one Fri of the month, across the board, stock volume transactions rise above average daily transactions. why does this happen?

most people will cite that it is because it is this day that equities and index Options and sometimes Futures expire... but so what that these derivatives expire?

why is it that when these derivatives expire, the overall trading volume of equities markets rise? aren't these derivatives separate classes of assets that can be traded independently from stocks, nevermind the existing relationship? who is to dictate that i must buy or sell stocks when i trade options? for most options traders, they take positions in Options without accompanying stock positions; such as Long Call, Short Put, etc and hence liquidating those options on expiration day should have no material impact on volume of stocks traded. of cos, those who BUY/SELL-Write (eg, Covered Calls, married Puts) will likely close off their stock positions as they square off their Options as well. but these are arguably a significantly smaller group in the Options trading space. consequently, their overall trades should not consistently rake up the increased volume that we witness on every expiration day.

so, then, why do stock market transactions volume spike on such expiration days?

the answer lies in Conversions and Reversals....