Wall Street’s $5.5 trillion triple-witching to test market calm
The so-called ‘triple-witching’ will see some $5.5 trillion worth of options tied to indexes, stocks, and exchange-traded funds fall off the board, according to an estimate from options platform SpotGamma. As the contracts disappear, investors will adjust their positions, adding a burst of volume capable of swinging individual holdings.
This quarter’s expiration comes as implied volatility on S&P 500 options is holding near the lowest level since before the coronavirus pandemic, with the US benchmark index riding the surge in shares of Nvidia Corp. and other artificial intelligence-linked companies. The expiration coincides with index rebalancing, when S&P Dow Jones Indices shuffles company weightings and ETFs that track its gauges make similar adjustments.
After the positions roll off, taking with it an estimated $5 billion in so-called “long gamma,” the market could be set for a touch of turbulence, according to Scott Rubner, global markets division managing director and tactical specialist at Goldman Sachs Group Inc.
Friday’s confluence of events as well as next Friday’s session, which will see the Russell indexes reshuffle, “will be explosive trading sessions as we have seen classic asset managers more actively take advantage of excess volumes and tactically trade positions around,” Rubner wrote.
This time around, the expiring value tied to calls is some 11 times greater than the notional value of puts — according to Brent Kochuba, SpotGamma’s founder. That’s a stretch from last quarter when the ratio was
