Tomorrow's quad-witching is setting up as the largest September options-expiration on record driven by growth in index and ETF options volumes. According to Goldman derivatives strategist John Marshall, over $3.4 trillion of notional options exposure will expire this Friday including $555 billion notional of single stock options.
Given the range-bound nature of the equity market over the past several weeks, Marshall observes that a high proportion of the open interest is in options with strike prices that are near the current spot level, which suggests the gamma gravity at 4,500 which we discussed earlier this week, is about to fall away with a thud and greenlighting sharp swings in the broader market which will no longer be pinned to 4500. Given the popularity of call and put spread trading, there is also high open interest at the 4000 and 5000 strikes.
