Back in July, we have seen the position placed by this VIX trader with expectation of a large move in the market by October. The large movement did happen within the time frame which is August. This trader has re-established the position to another date. The huge risk for this VIX trader still remain in the hundreds of millions! Lets have a look at the positions which have been re-established.
Traders and Investors have been reading in the internet, forum and many other places (also in the previous FOMC minutes) in search for clues of when the next rate hike will strike. Though it is great to have an idea of when is the next rate hike, what is more important is to know what has happened to the market after the rate hike. Another important aspect that many traders may have missed out is “what actually happened if there is no rate hike”?
Let me provide a highlight on what has happened after a rate hike and what has happened even if there is no rate hike.
On every 3rd friday of March, June, September and December, the option expiration will coincide with the expiration of stock options, index options and index futures. This is known as triple witching.
With the introduction of the single stock futures in 2002, traders have started to call this triple witching as “quadruple witching”. Single stock futures will expire along with stock options, index options and index futures.
This quadruple witching expiration is coming right at us in the 3rd Friday of September which is this Friday.
What are the things to look out for during the Quadruple Witching week?
We all know that the 3rd friday of the month is the monthly expiration day. We also know that there are also weekly expiration dates on top of the monthly expiration. We would expect the closing price of the expiration date to be the final price for the position that we have entered. However this is not entirely true for SPX. The closing price on the expiration date may not be the final settlement price that you will get for your SPX position.
The markets have been climbing higher and higher with the exception of the recent wild movements. This is the period of uncertainties with geopolitical news, market extension to new highs and low VIX. A trader has the expectation of further huge movements in the market with the odds against him. The trader is still holding the position with the risk of hundreds of millions of dollars if he is wrong! Time is running out for this trader. Will this trader be the ultimate winner?
Whenever market is facing some kind of ‘crisis’ or sudden selloffs, investors and traders will likely to move their cash to other asset classes which they call them safe havens. One of the popular safe havens that most investors run to is gold. However, looking closely at the other asset classes, we can also see that there are other safe havens that investors and traders go to as well. There can be tell-tale signs of market weaknesses when the following 4 safe havens have started to rally all at the same time.
Many traders may have seen the formation of the selloff waves (via low VIX, slowing down of the upwards movement, too fast a move in the upside, waves theory say so, etc) and they prepared but the selloff did not come true as yet. So the waiting continues with frustration building up for the traders.