While stocks attempted a rally early on Friday, they quickly gave up their earlier gains as investors are ending a week that included some massive ranging moves. Volatility is still at an all-time high, as stock index futures and options investors prepare to exit all contracts for March and move to the June contract in what is referred to as “quadruple witching” options expiration.
The Dow Jones Industrial Average was up more than 400 points this morning before dropping back down .7% in Friday trade. The S&P 500 also fell 1.3% as of just after noon EST. The Nasdaq Composite is faring the best, off 0.5% after climbing more than 2% earlier.
Benchmark stock index ETFs are following the lower trade-in markets today with the SPDR S&P 500 ETF Trust (SPY) off 1.6%, the SPDR Dow Jones Industrial Average ETF (DIA) down 1.25%, and the Invesco QQQ Trust (QQQ) off 1%, the least affected of the three benchmark indices.
The open interest in March expiries of the popular S&P 500 futures contract is currently at its highest level in three years, showing that leveraged bets on U.S. stocks have accelerated rapidly in recent months.
While those positions can often be rolled over or unwound readily in calm markets, rampant volatility can make this task almost impossible, in volatile markets where the average move of the daily stock index is above 2.5%, its largest since the 2008 global financial crisis.
“The market is extremely narrow and panic-driven, so I suspect those wild moves will stay with us for some time,” Marija Veitmane, a multi-asset strategist at State Street Global Market said.