Source: Glonui.
The volatility is intensifying.
On Friday, the US stock market will experience a wave of turmoil.
According to the estimates of the options platform SpotGamma, Friday's "Triple Witching Day" will lead to the expiration of options worth about $5.5 trillion tied to indexes, stocks, and ETFs.
Triple Witching Day collides with index adjustment.
Triple Witching Day refers to the day when options on indices, stocks, and ETFs expire simultaneously, usually occurring once per quarter on the third Friday of March, June, September, and December each year.
On Triple Witching Day, as options contracts expire, investors adjust their positions, leading to a surge in trading volume and sudden price fluctuations.
What's particularly unusual is that this Triple Witching Day coincides with the day when the S&P Dow Jones Indices adjust their weights every quarter, and a bunch of ETFs that track the index will also adjust their holdings, which could further exacerbate volatility.
However, due to different calculation methods, different Wall Street institutions have different estimates of the scale of expiring options.
Goldman Sachs analyst John Marshall expects Friday's US stock option expiration to be the largest ever, with the nominal value of expiring options exceeding $5.1 trillion, exceeding the historical record of $4.9 trillion set in December last year.
Citigroup estimates the scale to be $4.8 trillion.
The market may see a slight decline.
In terms of impact, Scott Rubner, global head of market department at Goldman Sachs Group, expects $5 billion of long gamma to disappear after position reduction, which could lead to some turbulence in the market.
Scott Rubner believes that Friday's series of events, along with the Russell index adjustment next Friday, "will be an explosive trading period, as we've seen traditional asset managers become more aggressive in using excess trading volume and tactically trading positions."
SpotGamma founder Brent Kochuba pointed out that this time, the value of call options expiring is about 11 times the nominal value of put options. This is a significant difference compared to last quarter, when the ratio was close to 5:1.
The widening gap indicates a growing demand for upside exposure and a shrinking demand for put options. He believes this could also lead to a slight drop in trading-active benchmark indexes and stocks on Friday and early next week.
Kochuba also pointed out: "The options market is too bullish, the market will start to consolidate, and the market will become more unstable."
Is Nvidia already hurt?
During this Triple Witching Day,$NVIDIA (NVDA.US)$the stock price will also suffer a huge impact.
The value of Nvidia's expiring contracts is the second largest among all underlying assets, second only to the S&P 500, and higher than ETFs related to assets such as $SPDR S&P 500 ETF (SPY.US)$and Nasdaq 100.
Affected by this, Nvidia's stock price rose sharply by 3.74% overnight, reaching a record high of $140.76. However, Nvidia ultimately fell 3.54% to $130.78, with a total market value of $3.22 trillion.
Today, Nvidia's stock fell nearly 5% and as of filing this report, it has fallen more than 3%.
Some people speculate that after the options expire on Friday, the momentum that has pushed Nvidia's stock price up may weaken.
In addition, some market participants believe that the impact of quarterly options expiration is often exaggerated.
Rocky Fishman, founder of derivatives analysis company Asym 500, said that although the nominal value of expiring options may be increasing, the overall market is also growing.
"As the economy expands and the stock market value increases, all numbers will grow over time, but as a percentage of the stock market size, I am sure that this is far behind last December."
Editor/tolk