American investors and operators are preparing for a gigantic expiration of options for US $ 6.5 billion directly impacts the sharescausing greater volatility than the view in recent weeks.
As in each quarter, this Friday expires a set of different financial derivative contracts negotiated in the bag, in an event called “Triple witchcraft” for his powerful power of “destruction”.
The daily behavior of the American Variable Income remained very stable since the beginning of May, mainly because of the Fixing effect of the bearish operations carried out with options, when It was unlikely that the S&P 500 would reach historical maximums again.
This effect refers to Trend of the price of an action to close near the price price of the options with greater negotiation volume as the expiration date approaches.
In this framework, by the commercial war promoted by Donald Trump, many pessimistic investors bought these insurance against a new fall of shares, limiting the rise of the S&P 500 to just over 5,981 points current.
“People could have seen a level of 6,000 points as something really difficult to achieve, since we were dealing much about the tariff drama in recent months and, therefore, they sold purchase options in the 6,000 range as a way of financing protection at various points,” he explained Rocky Fishmanfounder of the Asym 500 stock market firm.
An important event: Wall Street, attentive to volatility
According to the specialist, this Friday’s expiration is “One of the greatest in history”since market creators and stockbrokers generated a scenario in which there could be strong implications and repercussions.
According to Citigroup calculations, This Friday they expire US $ 5.8 billion open interest of optionsincluding US $ 4.2 billion on index options, US $ 708,000 million bets in YU $ S819,000 million options on individual shares. And for Fishman, the total rises directly to US $ 6.5 billion.
The size is dangerous because already the maturities of options force operators to adjust or close their positions, making market prices and exercise have to match. And if there is a lot of difference, fluctuation can become overwhelming.
Source: Ambito
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