Just today! The largest options expiration in history, will the US stock market face a "crazy day"?

This week's final trading day on Wall Street may see significant turbulence as traders prepare for an unprecedented options expiration event.

According to Goldman Sachs data, over $7.1 trillion in notional value of options contracts will expire this Friday, setting a historical record. This day is referred to as "quadruple witching," where stock index futures, stock index options, individual stock futures, and individual stock options all expire simultaneously. This concentrated expiration typically amplifies market trading volume and volatility.

In this record-setting expiration event, approximately $5 trillion of risk exposure is linked to the S&P 500 index, with an additional $880 billion related to individual stocks. Goldman Sachs noted that while December options expirations are usually the largest of the year, this one exceeds all previous records, with the notional risk exposure equivalent to about 10.2% of the total market capitalization of the Russell 3000 index.

This event occurs against the backdrop of significant gains in U.S. stocks this year. The S&P 500 index has risen about 15% this year, trading around 6770 points on Thursday. The record options expiration could become a key variable in the year-end market, adding significant uncertainty.

The Largest Expiration Event in History

The attention surrounding this options expiration is primarily due to its unprecedented scale. According to Goldman Sachs analyst John Marshall's estimates, over $7.1 trillion in notional risk exposure will expire today.

This day is known on Wall Street as "quadruple witching," occurring only four times a year on the third Friday of March, June, September, and December.

On this day, four types of derivative contracts settle simultaneously, forcing traders and market makers to engage in significant amounts of closing, rolling, or hedging activities, leading to unusually active trading. Goldman Sachs data shows that the trading volume of zero-day-to-expiration options (0DTE) related to the S&P 500 index has reached historical highs, accounting for over 62% of total options trading volume, further complicating the day's dynamics.

Increased Volatility or "Pin" Effect?

Such a massive options expiration could have two distinctly different impacts on the market.

On one hand, it may exacerbate market volatility. Jeff Kilburg, founder and CEO of KKM Financial, stated, "I expect trading volume to far exceed normal levels as options traders need to settle their profits and losses for 2025." He specifically pointed out that the 6800-point level of the S&P 500 index is a significant strike price, and the market will watch whether bulls can successfully defend this level.

On the other hand, the large volume of options could also produce a "pin" effect, potentially suppressing price volatility. Goldman Sachs explained in its report that if a large number of options contracts have strike prices that are exactly equal to or very close to the current market price of the underlying asset (i.e., "at-the-money options"), the actions taken by market makers to hedge their own risk exposure could "pull" the stock price toward this heavily traded strike price, resulting in the stock price stabilizing near that level at the close Goldman Sachs has found that individual stocks, including GeneDx Holdings, BILL Holdings, Avis Budget Group, and GameStop, have a high proportion of soon-to-expire options relative to their average daily trading volume, making them more susceptible to the "pinning" phenomenon.

Key Technical Levels and Market Sentiment

From a technical perspective, the market is at a delicate balance point. According to a report from options analysis firm SpotGamma, the S&P 500 index is currently in a "negative gamma" range from 6700 to 6900 points, which means the market itself tends to amplify volatility, accelerating upward during rises and downward during declines.

SpotGamma identifies 6800 points as a key "Risk Pivot." The report indicates that if the index can recover and stabilize above 6800 points, it may be seen as a signal to initiate a "Santa Claus rally." However, if the index remains below 6800 points, downward pressure will dominate, and there is a lack of strong technical support below. The firm warns that even if the market rebounds to 6800 points, it could easily fall back, and only when the index clearly breaks through this level will funds selling put options enter to provide new support.

For investors seeking trading opportunities, SpotGamma suggests that if bullish, consider a call spread strategy near the 6900 points expiring on December 31; if bearish, it recommends choosing put options expiring in February or March next year to avoid rapid time value decay during the holiday period