$5 Trillion Options Expiration Blamed For Sluggish U.S. Stocks

Dealers squaring their books ahead of an options expiration, set to be the largest on record for S&P 500-linked derivatives, may be helping to tamp down swings in US stocks, according to Saqib Iqbal Ahmed's report for Reuters.

US stocks could use some of that Taylor Swift magic. I Photo: New York Stock Exchange Facebook

Some $5 trillion in US stock options are set to expire on Friday, with 80% in S&P 500-linked contracts. This is the largest expiration in at least 20 years, according to Asym500 MRA Institutional, a unit of derivatives strategy and execution firm Macro Risk Advisors.

While such events can exacerbate volatility, strategists say market participants' behavior ahead of the upcoming expiration has been muting stock gyrations and may be one reason equities have traded in a tight range over the last few weeks.

The S&P 500 is up 21% this year, following a nearly 13% rally from its October lows. More recently, however, market moves have been subdued.

The benchmark index has not logged a greater than 1% move in either direction for 19 straight sessions, the longest such streak since early August. At the same time, the Cboe Volatility Index stands at 12.07, a near 4-year low.

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