Read the story here. Advertise at Before It's News here.
Profile image
By silveristhenew (Reporter)
Contributor profile | More stories
Story Views
Last hour:
Last 24 hours:

There’s 1.4 Trillion Reasons Why Tomorrow’s ‘Quad Witch’ Could Matter

% of readers think this story is Fact. Add your two cents.

In 2015, options expirations mattered – stocks would tear higher into the event and like clockwork sink back lower after.

2016 was not so obvious but the all-important ‘quad-witch’ expirations still had some bias.

However, if JPMorgan’s equity derivative strategists are right, tomorrow’s ‘quad-witch’  – with $1.4 trillion worth of S&P 500 notional set to expire – could lead to a vicious cycle higher in volatility going forward.

It is notable that VIX has been entirely decoupled from stocks for over 6 weeks now…

Right as Catalsyt Fund liquidation chatter began (forced buying due to the gamma in their options strategy – which is likely heavily used across many funds)…

VIX Call volume relative to put volume has collapsed to pre-December op-ex…

Which brings us to tomorrow’s ‘quad-witch’ options expiration. As JPMorgan’s equity derivatives group warns, on Friday, ~$1.4Tr notional of S&P 500 options expires.

As the market drifted lower over the past roughly two weeks and option positions were rolled higher into/following Feb expiry, the gamma imbalance fell significantly and is now only moderately tilted toward calls (~$15Bn per 1% now vs. ~$50Bn into last month’s expiry).

[NOTE – there is a huge pin around 2250 – puts and calls – which just happens to be around the level at which Catalyst's strategy started to implode]

The gamma imbalance remained tilted toward calls throughout the past two weeks, and thus dealer hedging activity likely continued to depress market volatility.

However, the majority (~70%) of the imbalance expires on Friday, likely leaving dealers close to flat post expiry (assuming spot roughly unchanged), and the gamma imbalance remains highly sensitive to spot moves near current levels and would be flat if the S&P 500 fell just ~1% (Figure 3).

This suggests dealers could be taken short gamma relatively quickly on a selloff (particularly if it comes ahead of March expiry).

In english, Friday’s expiration could change options dealers’ positions in a manner that could leave them more likely to feed into any uptick in stock market volatility going forward, and after tomorrow, dealers’ positions in S&P 500  options will change so that any stock market selloff could quickly see dealers boosting volatility as they hedge their positions.

Or even more simply put, the foot on the throat of volatility could well be lifted tomorrow… and positioning suggests any pain will quickly feed on itself.


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen! 
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover -  Reduces Smart Meter radiation by 96%!  (See Video)

Report abuse


    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    Load more ...




    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.