🎁Surge in Option Trading: A Systemic Risk or Price Stability Tool?
Since March, the market enthusiasm brought about by artificial intelligence is expected to usher in a new milestone. The scale of individual stock options trading will once again exceed the stock trading volume after nearly three years.
In recent years, trading including ultra-short-term options has continued to be hot and has become the main driver of violent fluctuations in the stock prices of many companies.
As the fever in the derivatives market persists, will the Fed's next policy stance pose a risk of market disruption?
Data compiled by Goldman Sachs last week showed that U.S. stock options trading volume in March was on track to exceed equity trading volume for the first time since late 2021, raising the possibility of significant market volatility.
At that time, turning points came one after another. As the Federal Reserve started a new round of tightening cycle, U.S. stocks did not bottom out until October 2022.
Agency statistics have found that popular technology stocks have shown obvious signs of Gamma Squeeze, which is a self-reinforcing behavior in which investors buy out call options, which causes market makers to hedge the underlying stock by buying stocks, thereby pushing up the stock price.
Last Friday, the U.S. stock market ushered in the first "Triple Witching Day" this year, with nearly US$5.3 trillion in financial derivatives including stock index options, individual stock futures and options completed delivery.
Brent Kochuba, founder of analytical service company SpotGamma, said that investors' options positions still tend to be bullish contracts, showing that optimism has not changed significantly.
It should be noted that the recent rebound was driven by the Federal Reserve's (expected) interest rate cut in the first half of the year. Judging from sentiment indicators, investors are waiting for the Fed's further views on policy turning points.
Questions for Tigers:
What do you think of the market? Optimistic or cautious?
Have you traded options recently?
Are you interested in the options underlying the top trading volume of the previous trading day?
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