Investors are gearing up for a massive $6.5 trillion worth of US options to expire this Friday. This event, known as “triple witching,” could lead to more volatile stock market swings after weeks of calm trading.
Triple witching happens quarterly when stock options, index options, and index futures all expire on the same day. While the event itself may not cause big moves on Friday, it often sets the stage for sharper market fluctuations in the following week.
Since early May, US stock movements have been relatively steady. This calm was partly due to the “pinning” effect, where stock prices hover near the strike prices of heavily traded bearish options bought earlier in the year. Back then, many investors doubted the S&P 500 would rebound to near-record highs and bought protection against further declines, selling call options near the 6,000 level to fund these positions.
Rocky Fishman, founder of Asym 500 LLC, called this Friday’s expiration “one of the largest ever.” The hedging actions by market makers and dealers, who adjust their positions to manage risk, have contributed to the recent market calm despite global tensions and ongoing tariff talks.
Matthew Thompson, co-portfolio manager at Little Harbor Advisors, noted that traders watch triple witching closely because dealer hedging can influence volatility. Dealers may sell into rallies and buy during dips, which can stabilize prices, a state known as positive gamma.
However, during the tariff turmoil in April, dealers had to sell into falling markets and buy as prices rose, which increased market swings.
Citigroup strategists Vishal Vivek and Stuart Kaiser said triple witching days are usually no more volatile than regular monthly options expirations, but this Friday’s event is significant due to the sheer volume of contracts expiring.
Citi estimates about $5.8 trillion in equity-related options will expire, including $4.2 trillion in index options, $708 billion in ETF options, and $819 billion in single stock options. Fishman’s $6.5 trillion figure also includes options on equity index futures expiring Friday.
This triple witching falls on June 20, the third Friday of the quarter, marking a key moment for traders and investors to prepare for potential market swings in the days ahead.
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