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.

On “quadruple witching” derivatives of the main stock index futures, stock index options, stock options, and single stock futures expire simultaneously, typically causing more erratic market behavior.
According to Trade Alert, $1.5 Trillion worth of options are set to expire Friday, giving investors anxiety about whether to extend their hedges against a falling market or how to reposition themselves.

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.

Although some market participants were hoping this Friday’s concurrent quarterly expiration of U.S. options and futures contracts could shake some sense back into stocks and drive them higher, a rapid reversal in crude prices, which had climbed more than 30%, has filled investors with panic as West Texas Intermediate futures were then down more than 10% at $22.62 per barrel. In addition orders in California and New York state for non-essential workers to stay home has generated fears about a bigger economic impact from the coronavirus.
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