Today Marks the Second Largest Single Stock Options Expiration in History ($818B), Names to Watch: HLT, VLO, IBM, GM, GOOGL, CRM

June 18, 2021 10:10 AM EDT
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Goldman Sachs analyst Vishal Vivek shares comments on today’s massive single stock options expiry. As much as $818 billion of single stock options is set to expire today, the second biggest ever after January this year.

“Broadly, total open interest on single stocks has increased to nearly $3tn, the highest level since January of this year, as daily options trading activity continues to exceed shares traded (single stock options volumes have been 104% of shares volumes over the past month). Volumes are concentrated in short term contracts, with 71% of all contracts traded in options with less than 2 weeks to expiry; this compares to the long-term average of 57%,” Vivek said in a note.

In this context, stocks to watch are those with large open interest in at-the-money (ATM) options.

“In situations where there is a significant amount of expiring open interest in at-the-money strikes (strike prices at or very near the current stock price), delta-hedging activity can impact the underlying stock’s trading that day. If market makers or other options traders who delta-hedge their positions are net long ATM options, expiration-related flow could have the effect of dampening stock price movements, causing the stock price to settle near the strike with large open interest. This situation is often referred to as a “pin” and can be an ideal situation for a large investor trying to enter/exit a stock position. Alternatively, if delta-hedgers are net short ATM options (have a “negative gamma” position), their hedging activity could exacerbate stock price moves.”

“Market makers delta-hedging their unusually large options portfolios will be active. This flow is likely to dampen volatility in some names while exacerbating stock price moves in others,” he adds.

Names to focus on include Hilton Hotels (NYSE: HLT), Valero Energy (NYSE: VLO), IBM (NYSE: IBM), General Motors (NYSE: GM), Alphabet (NASDAQ: GOOGL), and Salesforce (NYSE: CRM).

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