All articles tagged with #options expiration
The upcoming 'triple witching' options expiration, involving over $6 trillion in assets, is unprecedented as it occurs one day after a market holiday, potentially causing significant market volatility on Friday.
Nearly $6 trillion in options are set to expire during Friday's record-breaking 'triple witching,' causing volatility as the Dow wobbles and the S&P 500 trades modestly lower.
Stocks opened in mixed territory as the Dow and S&P 500 dipped slightly, while the Nasdaq Composite gained. The Federal Reserve's dovish tone and prospects of more rate cuts have boosted Wall Street's spirits, leading to a record-setting rally. However, some caution that markets may be getting ahead of themselves, and European central banks have discouraged hopes for policy easing. The expiration of $5 trillion in US stock options, primarily S&P 500-linked contracts, could limit any potential pullback. Oil prices rose, supported by a fall in the dollar and on track for their first weekly gain since October.
Wall Street's fear gauge, the Vix, reached a six-month high as stock options tied to $2.5 trillion in market value are set to expire, potentially leading to increased volatility in the stock market. Of the $2.5 trillion, $1.7 trillion worth are linked to the S&P 500. Large option expiration days often result in heightened trading activity and intraday volatility. The rising Vix has made this expiration particularly significant, with some investors closely monitoring the event. While a rising Vix may indicate more market pain ahead, it also benefits option-selling strategies. Additionally, the popularity of shorting volatility and selling covered calls has increased this year. Rising Treasury yields are also causing concern among traders, with U.S. stocks selling off as the 10-year Treasury yield approached 5%.
The Nasdaq 100 will undergo rebalancing on July 24, with weight reductions for Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta Platforms, and Tesla, while Broadcom, PepsiCo, Costco, Adobe, Cisco Systems, and Netflix will see increased weights. Despite expectations of selling in the rebalanced stocks, the consensus is to buy on any dip. Additionally, $2.4 trillion of options expiration may counter the selling pressure. Investors are advised to understand market mechanics and consider the protection band strategy. In early trading, investors are buying Tesla and Netflix, while American Express is being sold. The momo crowd is buying stocks and oil, while selling gold. Bitcoin is below $30,000.