This Friday is "Triple Witching Day" (triple witching), which is expected to be the largest Options expiration day ever. According to Statistics, the total amount of Options linked to Stocks, Exchange Traded Funds (ETFs), and Indexes that are about to expire exceeds 6 trillion dollars. Specific figures provided by Asym 500 show 6.6 trillion dollars, while some Institutions even estimate that the nominal value is higher, reaching 7.7 trillion dollars.

Typically, the market opens with the most active trading wave. At that time, most Options linked to$S&P 500 Index (.SPX.US)$will be exercised or become invalid. According to Asym 500's Rocky Fishman, looking at the statistical value of 6.6 trillion dollars, this quarterly Options expiration day will set a historical record.

However, he added that compared to the Options expiration in December of last year, the expiration amount has decreased relative to the total market capitalization of Stocks listed in the USA. In December of last year, the total market capitalization of the USA stock market was 48 trillion dollars, while it has now risen to 62 trillion dollars.

Quarterly Options expiration is usually closely watched by traders, and this time is especially important due to the significant sell-off triggered by the Federal Reserve's policy this Wednesday.

As investors worry that the Federal Reserve may be nearing the end of its interest rate hike cycle, the Dow Jones Industrial Average plummeted by more than 1,100 points on Wednesday. Meanwhile, Cboe Global Markets $CBOE Volatility S&P 500 Index (.VIX.US)$ Recorded the largest one-day increase since 2018. The level of this Index is influenced by S&P 500 Options Trading.

In addition, the latest data on the Personal Consumption Expenditures (PCE) Price Index set to be released Friday morning may further amplify market volatility. eToro USA investment Analyst Bret Kenwell stated: "The PCE report on Friday becomes particularly important. If the data is higher than expected, it may intensify recent selling pressure; whereas a lower than expected figure might ease Wall Street's concerns about re-inflation."

SpotGamma founder Brent Kochuba pointed out that prior to Wednesday's market sell-off, the options positions expiring on Friday were heavily tilted towards Call options, with the number of Call options open contracts far exceeding that of Put options. However, this situation has changed in the last 24 hours, although the open amount of Call options still remains higher than that of Put options.

Kochuba noted that as these Put options expire or are rolled over, they may play a stabilizing role in the market. This is because the liquidity from dealers' hedging may suppress volatility rather than exacerbate it. However, he also warned that Wednesday's sell-off could just be a "preliminary shake-up," which may signal a more painful decline in early 2025.

Once a quarter, options contracts linked to individual stocks, ETFs, and indices such as the S&P 500 will expire alongside major Equity Index futures contracts. Derivatives market experts refer to this as the "Triple Witching Day," because days with the expiration of such large-scale derivatives contracts usually see higher trading volumes and market volatility.

For investors, this Friday will be a key point in time that requires close attention. As the dynamics of the options market adjust and PCE data is released, the future direction of the market may become clearer.

Editor/Rocky