December 15th, 2023

Triple Witching. Triple witching refers to the simultaneous expiration of stock options, stock index futures, and stock index options contracts, occurring four times a year. It is the final day in this stretch of days where I have been saying that the big players ‘have to do something, vs want to do something.’ With so many expirations today, you can expect an increase in what I call random volatility. This is a day I don’t even observe, I just leave altogether because you will gain little to nothing on a day like today. Starting Monday, I believe we go back to a more ‘technical market’ and a time where I believe day trading becomes favorable again.

Something to note today because this is such a big OpEx is the morning note from my friends at Mentor Q: ‘With so much gamma (mainly call gamma) expiring, we would expect an increase in volatility as gamma is removed from the market and market makers re-adjust. One thing to note is that flows have continued to be bullish during the week. After this OpEx, we would expect following the initial volatility driven by the event to rally into year-end, supported also by seasonality. Being short volatility can be dangerous in an environment like this one. The market is very stretched here, and we have not seen a 1% pullback since October. But as we have been saying on X, flows have been strong, and flows are what really matters right now. Having said that, there is still fragility in the markets that you want to be aware of.’

As for me, I will be taking the day away from the screens to enjoy a day of cool weather down here in Southwest Florida. As always, be small and smart and don’t ruin Christmas.
Cheers, DELI