Here Are The Stocks Expected To Move The Most In Today’s $3.3 Trillion OpEx

January 21, 2022   |   Tags:
Here Are The Stocks Expected To Move The Most In Today's $3.3 Trillion OpEx

As we noted last night, today we see a whopping $3.3 trillion in total notional option expirations, of which $1.3 trillion in single stock options expirations, the 2nd largest ever, and ~2.7% of the Russell 3000 market cap. According to Goldman, single stock options trading activity remains robust, with an average daily notional of $506bn in January, consistent with the elevated levels of 2021 (average daily notional of $468bn).

Why does this matter? Well, as we have discussed extensively in the past, at major expirations, options traders track situations where a large amount of open interest is set to expire. In situations where there is a significant amount of expiring open interest in at-the-money strikes (strike prices at or very near the current stock price), delta-hedging activity can impact the underlying stock’s trading that day. If market makers or other options traders who delta-hedge their positions are net long ATM options, expiration-related flow could have the effect of dampening stock price movements, causing the stock price to settle near the strike with large open interest. This situation is often referred to as a “pin” and can be an ideal situation for a large investor trying to enter/exit a stock position. Alternatively, if delta-hedgers are net short ATM options (have a “negative gamma” position), their hedging activity could exacerbate stock price moves.

As Goldman also notes, today's expiry could be important for stocks with large open interest in at-the-money (ATM) options as market makers' delta-hedging large options portfolios will be active. This flow is likely to dampen volatility in some names while exacerbating stock price moves in others.

Large market cap names include EXPE, FISV, CMCSA and TGT. Expiration-related activity is likely to have more of an impact if the open interest represents a significant percentage of the stock's volume.

Tyler Durden Fri, 01/21/2022 - 09:19