Get ready for a high-octane, potentially extremely volatile trading session as options contracts worth over $5 trillion are set to expire on Friday. The latest “triple witching” expiration event is colliding with the rebalancing of the S&P 500 and Nasdaq-100. Market strategists anticipate a frenzy of trading activity as tens of billions of contracts and shares could change hands.
According to figures from Rocky Fishman, founder of Asym500, options with a notional value of $5.3 trillion are set to expire, with the largest portion expiring ahead of the open. On one side, traders will be cashing in bullish bets while market-makers continue to hedge their exposure.
Managers of index-tracking funds will also be adjusting their holdings before the announced index changes take effect, further adding to the market activity. Trading volume has been on the rise all week, with Thursday seeing 17 billion shares change hands in the U.S. market. Experts are predicting enormous volumes on Friday in a lot of popular names.
This expiration could be the largest SPX option expiration in more than a decade, setting up for potentially historic market conditions. As markets have rallied, traders have been scooping up bullish options contracts at a record pace, setting the stage for a potentially chaotic session on Friday.