Options Are All the Rage in Stocks With $2 Trillion Deadline Looming

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The fresh boom in stock options that expire within 24 hours has grabbed all the attention on Wall Street trading desks — spurring a Goldman Sachs Group Inc. warning that the activity is fueling the recent market selloff.

Now, the grown-up versions of the derivatives are back in the spotlight in the monthly event known as OpEx.

While the options event usually provides a window of liquidity for anyone hoping to shuffle large positions, it adds another wrinkle of complexity for a capricious equity market — prone to intraday selloffs and frequent reversals. Heeding that pattern can be dangerous ahead of Kansas City Fed’s annual policy forum in Jackson Hole, according to Brent Kochuba, founder of analytic service SpotGamma. He’s advising investors to consider buying protection given how subdued the cost of options is right now.

One breed of market player worth watching: Funds that buy or sell options as part of their investment strategy and rebalance their holdings monthly, like the Global X Nasdaq 100 Covered Call ETF . As they roll out positions around the third Friday of a month, that activity can add a layer of uncertainty for traders.

 

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