On Friday, the event known as 'Triple Witching' marked the end of the market's nearly $5.5 trillion options market, plus the ETF's big repositioning due to end-of-quarter index adjustments, causing a violent market fluctuation. On product structure, the operating income of products worth ¥100-300 billion is ¥401/1288/60 million respectively.
The U.S. exchange saw turnover of 18 billion shares, up a staggering 55% from the three-month average, and the volume of S&P 500 index futures in the final trading session surged 30% above the daily average.
Among the $5.5 trillion securities derivatives expiring on Friday, derivatives related to NVIDIA had the second highest contract value, second only to the S&P 500 index.
The 'Triple Witching Hour' refers to the simultaneous expiration of stock options, stock index futures, and stock index option contracts on the same day of trading. This happens four times a year, on the third Friday of March, June, September, and December.
Interactive Brokers' analyst Steve Sosnick pointed out that the technology industry ETF with a high market capitalization of $80 billion will be key in this index adjustment.$The Technology Select Sector SPDR® Fund (XLK.US)$Due to the restriction of the proportion of heavy-weighted stocks, XLK needs to sell some Apple stocks and buy Nvidia on Friday.
Sosnick said: 'After the adjustment, the weight of NVIDIA in the index will rise sharply, while Apple will decline. Considering the importance of technology stocks (especially NVIDIA) with super-large market value to ETFs, it is reasonable for traders to remain cautious about excessive fluctuations later in the day.'
On 'Triple Witching Day', the S&P 500 index fell slightly to 5465 points, and the final trading session's volume exceeded the daily average by 30%. NVIDIA stocks initially fell by about 5% before rebounding, but fell again in the final trading session and ultimately closed down 3%. The market value evaporated more than $220 billion in the past two trading sessions.
Analysts warned to pay attention to the risk of overvalued AI hype in the technology industry.
Michael Hartnett, a strategist at Bank of America, pointed out that the AI craze has not only made NVIDIA the world's largest company in terms of market value this week, but has also driven record inflows into technology ETFs. Data from EPFR Global shows that about $8.7 billion flowed into tech ETFs in the week ended June 19.
Hartnett said, 'All roads lead to NVIDIA' as he supported trading, despite political turmoil in France. However, investors remain skeptical about high equity concentration risk while still feeling the need to invest more in AI-related investment opportunities.
Keith Lerner of Truist Advisory Services said that the company downgraded the technology sector to 'neutral' after the technology sector greatly exceeded the S&P 500 index under their 'overweight' recommendation since November.
Lerner said: 'Although we continue to see strong long-term prospects for tech stocks, short-term valuations in the industry appear to have exceeded reasonable levels, and we will not be chasing the sector. That said, technology stocks are still some distance from being in a 'bubble', and we believe that positive factors related to AI will continue to exist in the long run.'
The sharp fluctuations during this Triple Witching Hour may only be the beginning; investors need to prepare for the second half of 2024 and the next steps of the Fed.
Solita Marcelli, of UBS Global Wealth Management, said, 'The second half of 2024 will be a period of transformation and volatility, and investors should be prepared for dramatic changes.'
John Stoltzfus, market analyst at Oppenheimer Asset Management, said he remained optimistic about the prospects for stocks as earnings are expected to improve this year.
Stoltzfus said: 'History tells us that prices of stocks and other assets do not rise in a straight line, but gradually rise in an environment filled with worry and uncertainty, requiring prudent diversified strategies, patience, tolerance for risks and volatility of private investors, as well as discipline.'
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