Options traders to boost market seesaw as $3.5 billion stock options expire today: Bloomberg
According to Goldman Sachs Group Inc (NYSE:NYSE:), about $3.5 trillion in single and index-level stock options will expire in a quarterly event, dubbed the triple witch, Bloomberg reports. At the same time, more near-the-money options are expiring than ever since 2019, suggesting that investors will be actively trading around these positions.
The triple witch coincides with a rebalancing of benchmark indices, including the S&P 500. According to an estimate by a senior index analyst at S&P Jones Indices, the index rebalancing alone could boost $33 billion in trades stock market.
Friday’s session lands just as the S&P 500 rallies with a three-day jump, buoyed by Federal Reserve optimism that the economy can withstand rate hikes and China’s promise to strengthen its bonds. financial markets.
The S&P 500 has climbed nearly 6% over the past three sessions in the best rally since 2020, as JPMorgan Chase & Co’s Marko Kolanovic (NYSE:NYSE:) urges investors to go all-in.
With weak market sentiment and institutional fund exposure to equities near multi-year lows, caution is warranted in the derivatives market. The 20-day average of the Cboe’s put-to-call ratio for stocks, for example, is near a two-year high.
According to Goldman strategist Rocky Fishman, with a considerable number of S&P 500 contracts close to the spot price, Friday’s trading activity looks more frantic than usual.
“The most attractive options are the close-to-the-money options because as we approach expiry there is uncertainty as to whether or not they will end up in the money,” he said. he declares. “This uncertainty can cause investors to actively trade around these positions.”
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