Friday, October 18th, local time, is the tenth options expiration date for the US stock market in 2024, as well as the final opportunity to close options before the US presidential election.

Specifically, options contracts with a nominal value of 3 trillion US dollars will expire at 4 pm local time on Friday, with 1.9 trillion US dollars associated with $S&P 500 Index (.SPX.US)$ The options related to 1.1 trillion US dollars will expire on Friday morning, while the remaining 1.1 trillion US dollars in exchange-traded funds (ETFs) and individual stock options will expire at the end of the day on Friday.

This is the largest October options expiration since 2017, but smaller than typical quarterly expiration sizes in recent years. The large number of expiring options may bring significant market sentiment and price volatility.

However, it is worth noting that the market environment for this options expiration is different from previous ones.Implied volatilityCurrently relatively high, options have a higher gamma value (option pricesMore sensitive to changes in the prices of underlying assets), there is a general sense of concern in the market, and the open interest in VIX-related options and futures is at the lowest level in nearly two years.

"This time it's different"

Goldman Sachs analyst Brian Garrett pointed out that the US stock market has not seen the expected major decline before the election:

In the past few weeks, the market has been hesitantly buying, with everyone's strategy seemingly suggesting selling before the election and then rebounding before the end of the year. US stocks typically experience significant seasonal volatility or declines in October.

However, the market did not experience the expected decline before the election. As the election approached without volatility, investors were forced to consider a scenario: "What if the market doesn't actually drop? And my current positions are very light."

More importantly, the number of open interest contracts for VIX call options is at the lowest level in nearly two years.

This week saw the largest call options contracts expiring in history, and the open interest in the market is also very low, which could trigger some market adjustments.

Furthermore, Goldman Sachs points out that it is appropriate to sell put options:

Given the reduction of short positions in VIX (volatility index) by traders, investors expect the market volatility to decrease, and take trading strategies based on this, such as selling put options; after the election, unless significant unknown risks arise, the current market skew may not persist, and traders may need to hedge the risk of a significant drop in VIX.

Volatility did not rise as usual.

Goldman Sachs also observed:

In the past few weeks, the US stock market has set several historical highs. Usually, when the underlying assets (such as stock indices) rise in price, their implied volatility also increases because market participants' expectations of future price changes increase. However, this time is different. Despite reaching new highs, volatility has not risen as usual.

In the past month, the S&P 500 index has risen by 4%, but there has been no bid for call options. Goldman Sachs stated:

In the past fifteen years, new historical highs have almost always been accompanied by demand for "FOMO call options". As investors buy call options with exercise prices far above the current market price, this is reflected in an increase in spot volatility correlation.

Editor/Somer