$7 trillion options expiry may leave markets more sensitive to flows, Citadel says
The event is taking place during a volatile week for US markets following the central bank's latest rate decision.
Roughly $7 trillion in US options notional value is rolling off Friday, accounting for about one-quarter of the market in the latest quarterly “triple witching” event, according to Citadel Securities.
The expiry, which includes monthly S&P 500 Index and single-stock options, ranks as the second-largest on record, with around 60% of positions expiring or rolling at market open.
Citadel Securities said the scale of the expiry could produce a reset in market positioning as options positions are closed or carried into later expirations. According to the firm’s market intelligence team, the positioning that has helped dampen realized moves may change significantly, potentially making markets more responsive to underlying flows once the expiry passes.
The expiry adds to a market backdrop already marked by shifting monetary-policy expectations and rising Treasury yields. US equities traded lower Friday as the 10-year Treasury yield moved toward 5%, with the quarterly derivatives expiration contributing to the session’s volatility.