{"id":74832,"date":"2023-10-20T10:11:56","date_gmt":"2023-10-20T14:11:56","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/traders-on-guard-with-2-5-trillion-in-options-set-to-expire-and-wall-streets-fear-gauge-at-a-6-month-high\/"},"modified":"2023-10-20T10:11:59","modified_gmt":"2023-10-20T14:11:59","slug":"traders-on-guard-with-2-5-trillion-in-options-set-to-expire-and-wall-streets-fear-gauge-at-a-6-month-high","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=74832","title":{"rendered":"Traders on guard with $2.5 trillion in options set to expire and Wall Street\u2019s \u2018fear gauge\u2019 at a 6-month high"},"content":{"rendered":"
\n

Wall Street\u2019s fear gauge was testing its highest levels of the year on Thursday just as stock options tied to $2.5 trillion in market value are set to expire and that could portend a bumpy ride ahead for stocks. <\/p>\n

Asym50 founder Rocky Fishman shared a note with MarketWatch on Thursday where he showed that options with a trillion in notional value linked to single stocks, stock indexes, exchange-traded funds and index futures are all set to expire on Friday. Of the $2.5 trillion, $1.7 trillion worth are tied to the S&P 500 either through futures, the SPDR S&P 500 Trust ETF
\n SPY,<\/span>
\n or cash-settled contracts that track the index. <\/p>\n

\n

Large option expiration days typically lead to a flurry of trading on the 16 U.S. options exchanges, which can occasionally spill over into the broader market, causing more intraday volatility. <\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

But a recent jump in Wall Street\u2019s fear gauge has prompted some on Wall Street to watch Friday\u2019s expiration even more closely, making it unusually significant for a monthly expiry where no futures contracts are expiring. Typically \u201ctriple witching\u201d days see a larger slug of options expire. <\/p>\n

\u201cThe rising Vix is definitely making [Friday\u2019s] expiration more interesting,\u201d said Joe Ferrara, investment strategist at\u00a0Gateway\u00a0Investment Advisers.<\/p>\n

The Cboe Volatility Index
\n VIX,<\/span>
\n better known as the Vix or Wall Street\u2019s \u201cfear gauge,\u201d finished above of 21 on Thursday, according to FactSet data. That\u2019s the highest level since March 24, according to FactSet data, a six-month high.<\/p>\n

See: <\/strong>The short-volatility trade is making a comeback in 2023 six years after triggering a historic stock-market wipeout<\/p>\n

That puts the fear gauge above its long-term average of 19.6. It also marks the first time the Vix has closed above 20 in 101 trading sessions, ending the longest such stretch since 2018, according to data from Tier1 Alpha. <\/p>\n

Ferrara said a rising Vix could be a sign of more pain to come for markets but a rising Vix also increases the value of S&P 500-linked options, which should benefit option-selling strategies that have become increasingly popular this year. Ferrara\u2019s firm manages a mutual fund that sells covered option contracts to generate additional returns. <\/p>\n

Strategies like shorting volatility by selling options have seen a surge in popularity this year, as MarketWatch reported back in August. <\/p>\n

In a note to clients on Monday, Charlie McElligott, a derivatives strategist at Nomura, said \u2018short vol\u2019 players have been \u201ccircling like sharks\u201d to take advantage of this latest richening in option premium driven by the higher Vix. <\/p>\n

Ferrara also pointed out that the JPMorgan Equity Premium Income
\n JEPI,<\/span>
\n better known by its ticker, JEPI, has seen sizable inflows this year as its strategy of selling covered calls has become increasingly popular among investors. <\/p>\n

JEPI has seen $16.2 billion in inflows over the past year, according to FactSet data. <\/p>\n

Rising Treasury yields are also making traders nervous. As the 10-year Treasury yield
\n BX:TMUBMUSD10Y
\n pushed toward 5% on Thursday, hitting fresh 16-year highs along the way, U.S. stocks sold off, with the S&P 500 closing 0.9% lower at 4,278. <\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Wall Street\u2019s fear gauge was testing its highest levels of the year on Thursday just as stock options tied to $2.5 trillion in market value are set to expire and that could portend a bumpy ride ahead for stocks. Asym50 founder Rocky Fishman shared a note with MarketWatch on Thursday where he showed that options […]<\/p>\n","protected":false},"author":1,"featured_media":74833,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-74832","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nTraders on guard with $2.5 trillion in options set to expire and Wall Street\u2019s \u2018fear gauge\u2019 at a 6-month high | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Wall Street\u2019s fear gauge was testing its highest levels of the year on Thursday just as stock options tied to $2.5 trillion in market value are set to\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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