A near-record dollar amount of single stock equity options -totaling $818 billion – is set to expire at the close of trading on Friday afternoon, potentially driving sharp moves in some stocks throughout the day, Goldman Sachs analysts wrote.
A recent surge in interest in options trading, fueled in part by droves of retail traders looking to place wagers on the swings in so-called meme stocks such as GameStop Corp (GME.N) and AMC Entertainment Holdings (AMC.N), has boosted trading in U.S. single stock options to record highs this year.
Single stock open interest now stands at nearly $3 trillion in notional terms, close to the highest level since Jan. 15, according to the report, which was authored by analysts Vishal Vivek and John Marshall and published on Friday morning.
The sheer volume of trading in some of these options is enough to move the stocks, analysts say.
“We know that the activity in the equity options from a lot of the younger meme traders and speculative trade is very high,” Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas, said.
Price action in GameStop and AMC was comparatively muted, with the companies’ shares down 3.52% and up 0.74%, respectively, on Friday afternoon. The S&P 500 (.SPX) was off 0.90%.
Friday also marks “quadruple witching day,” the quarterly simultaneous expiration of U.S. options and futures contracts, a market event that has in the past spurred record trading volumes as investors and dealers buy and sell derivative contracts and shares to replace expiring positions.
Stocks where a large percentage of contracts, relative to their average daily volume, are set to expire on Friday are worth watching, Goldman Sachs analysts wrote.
Hilton Worldwide Holdings Inc (HLT.N), Valero Energy Corp (VLO.N), International Business Machines (IBM.N), General Motors Co (GM.N), Alphabet Inc (GOOGL.O) and Salesforce.com Inc (CRM.N), were some names to focus on, the report said.