The largest in history! Super “Four Witch Day” is here. Will US stocks face extreme fluctuations tonight?

The Zhitong Finance App learned that the US stock market is expected to fluctuate on Friday because it coincides with the Fourth Witch Day — stock index futures, stock index options, individual stock options, and individual stock futures will expire at the same time. According to Goldman Sachs data, options contracts with a nominal value of more than 7.1 trillion US dollars will expire this Friday, setting a record high, including about 5 trillion US dollars of options linked to the S&P 500 index and 880 billion US dollars of options linked to individual stocks. Goldman Sachs analysts said that while the December option expiration date is generally the largest of the year, Friday is likely to have the largest option expiration date ever. Goldman Sachs said that in order to better understand this scale, the nominal exposure represented by options due on Friday accounted for about 10.2% of the total market value of the Russell 3000 Index.

Jeff Kilburg, founder and CEO of KKM Financial, said this dynamic could cause trading fluctuations, especially near the much-watched S&P 500 index levels. The S&P 500 is up about 15% this year and closed at 6775 points on Thursday.

Kilburg said, “I expect options trading volume to be much higher than normal because options traders are settling this year's profits and losses. However, it appears that many position adjustments have already been completed. 6,800 points is an important exercise price for the S&P 500. We will wait and see if the bulls push the market back above this price this morning and hold on to this position.”

However, although overall market volume and volatility may increase, some individual stocks with large open positions may experience a different situation. Massive options may have a “pinning” (pin) effect, which in turn inhibits price fluctuations. Goldman Sachs explained in its report that if the exercise price of a large number of options contracts is exactly equal to or very close to the current market price of the underlying asset, market makers' actions to hedge their own risk exposure may “pull” the stock price to the exercise price of this heavily traded price, causing the stock price to stabilize around this level at the close of the market.

Goldman Sachs pointed out that individual stocks, including GeneDx Holdings (WGS.US), BILL Holdings (BILL.US), Avis (CAR.US), and GameStop (GME.US), account for a high proportion of their average daily trading volume, so they may be more likely to be “pinned”.