Jensen Huang displays the new Blackwell GPU chip during the Nvidias GTC conference in San Jose, California, on 18 March 2024. (Photo: David Paul Morris/Bloomberg) Wall Street is facing a quarterly episode ominously known as “triple witching” in which derivatives contracts tied to equities, index options and futures are scheduled to mature — compelling traders en masse to roll over their existing positions or to start new ones. About $5.5-trillion are set to expire on Friday, according to an estimate from options platform SpotGamma.
The S&P 500 fluctuated amid trading volume that was 90% above the past month average. Nvidia extended a two-day stock rout that has wiped off more than $200-billion from the company at the heart of the artificial-intelligence boom. The value of contracts tied to the chipmaker set to expire on Friday is the second-largest of any underlying asset, lagging only the benchmark gauge.
The expiration also coincides with index rebalancing, when S&P Dow Jones Indices shuffles company weightings and ETFs that track its gauges make similar adjustments.
Treasuries lost traction after data showed US services activity picked up early this month to the fastest pace in more than two years while the outlook improved on cooler price pressures and prospects for lower borrowing costs. Separately, sales of existing homes fell for a third straight month.
At a time when the US stock market is breaking old records and setting new ones seemingly every day, bearish investors can’t be blamed for getting out of the way. Yet their increasing absence is leaving equities ever more exposed in the event of a sudden shift in sentiment.
Short interest in the two biggest equity exchange-traded funds — the SPDR S&P 500 ETF Trust (ticker SPY) and the Invesco QQQ Trust Series 1 (QQQ) — have plunged to record lows this year, providing a steady flow of support to stocks and helping to suppress volatility, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote this week.
At the same time, the stark absence of investors willing to bet on a decline in equities “signal a heightened vulnerability to negative news,” the strategists said.
The ongoing AI frenzy that briefly made Nvidia the world’s most-valuable company this week also drove record inflows into tech funds, said Bank of America strategists. About $8.7-billion flowed into tech funds in the week through June 19, according to a note from the bank citing EPFR Global data.