Home Forex Stock Market Today: OPEX and Hedges Will Drive Higher Volatility on Nasdaq

Stock Market Today: OPEX and Hedges Will Drive Higher Volatility on Nasdaq

by SuperiorInvest

The stock market ended higher yesterday. It was an entertaining day, especially if you understand the background to the sudden and “unexpected” rally, especially heading into today’s OPEX.

Each month, the Global

In December they sold 4,697 of the 16,650 calls on January 19, 2024. Those, of course, had to be covered, and the notional value of that, according to the ETF website, was around $8 billion.

It is likely that the market maker was also short that size in notional value, meaning that when the ETF covered them, the market maker covered their short.

The idea here is that the ETF buys back the calls the day before the OPEX and then on the day of the OPEX sells a new round of calls of similar size.

This could mean that we will see a similar $8 billion face value of calls sold today, of which the market maker will have to short.

Call buying began in full force at 2 pm ET, as indicated by the steady increase in volume at that time yesterday.

Now, new call options will be sold today, and that could erase much of yesterday’s bullish move by the end of the day when hedging flows and such come into play.

As the fund sells new call options, the market maker will most likely need to hedge by shorting the index futures. These new calls will be sold by the ETF for the February expiration date.

Aside from Bostic being stronger than expected and rejecting six rate cuts from March for the 50th time, it was a pretty normal day.

In my opinion, boring day except for , which yesterday fell 4% so far this year.

I would say that from a technical point of view, bitcoin at 40,000 is a very important level, and a break of that level could lead to a sharp drop in the cryptocurrency, or whatever it is considered today, to around 37,450 .

BTC/USD-Daily Chart

We also saw yesterday how the yield curve rose six basis points to 4.37% and, more importantly, approached the resistance of 4.40%.

That is a large and important region because it acted as resistance while rising in August and September. That resistance level was first established in October 2022.

US 30-Year Yield Daily Chart

US 30-Year Yield Daily Chart

And so today, once the OPEX is approved, we will have a better view of the entire market, as many of these hedging flows will fade next week. See you later.

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