It is Quadruple Witching Friday—that rare quarterly alignment where contracts on four different types of securities expire simultaneously:
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Index options
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Single stock options
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Index futures
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Index futures options
According to data from Goldman Sachs, a staggering $7.1 trillion in notional options exposure is set to expire today. To give you an idea of the sheer scale here, that represents notional exposure equal to roughly 10.2% of the total market capitalization of the Russell 3000.
Broken down, that includes about $5 trillion tied to the S&P 500 and another $880 billion linked to single stocks.
So, why is today so heavy?
December expirations are typically the biggest of the year anyway, as funds and retail traders alike look to close out positions and finalize P&L before the books shut. December options also attract the big annual hedges but even by December standards, this one eclipses all prior records.
In terms of price action, huge options expirations tend to get headlines as if they will stoke volatility but because of delta-hedging, they end up restraining volatility. S&P 500 futures were last up 6 points, or 0.1%.
Options tend to cluster around big round numbers and with S&P 500 futures at 6785, that will make 6800 as the main battleground. If we get there, we could see the market pinned there. At the same time, I will be watching price action in individual Mag7 names if we get stuck there as funds could be using the liquidity to make exits.
There is a popular line of thinking that the megacap names are due for some selling next year as the AI narrative is challenged and profitability re-prioritized
