According to the research, US options will increase volatility in the US stock market today. The expiration of contracts involving U.S. equities and indices, with a total value of $3.4 trillion, is a significant event. The stock market may become more volatile because this is the biggest September expiration ever.
U.S. stock options have been traded recently, especially those that are set to expire. A significant financial institution, Goldman Sachs, estimates that $555 billion in single stock options and $2 trillion in options on the S&P 500 index will shortly expire.
These options resemble wagers on the upward or downward movement of stocks. And what’s this? Because of recent changes in stock prices, several of them are on the verge of success. The stock market may become even more erratic as a result of this.
Typically, the stock market may behave strangely when these options expire. On days like today, strange things frequently occur on Wall Street, where a lot of stock trading takes place.
This is the sixth biggest expiration day ever, and the biggest for September. It’s surprising because the stock market has been pretty calm lately.
People have been trading options that are about to expire very soon, like within 24 hours. These now make up almost half of all S&P 500 options trading. This is one reason why there’s so much buzz about this event.
Prepare for Turbulence
Some experts are saying, “Be ready for a bumpy ride!” Historically, in 10 out of the past 11 years, the stock market has gone down on days like this. The week after this kind of day is usually rocky too. September is known for being a tough month for the stock market.
There’s another twist: a lot of options dealers (the people who make these bets) have to make new bets today because their old ones are expiring. This could make the U.S. stock market even more volatile. Big expiration days like this often go hand in hand with a wobbly market, according to experts.
Therefore, keep a watch on Wall Street today as it may be highly volatile due to the expiration of US options for the stocks and indices.
Source: Investing.com
