Quadruple witching holds up US stocks
US stocks rose in volatile trading yesterday, thanks only to technical factors and options expirations. But raging uncertainty about Greece prevented investors from committing money to the market.
The impending expiration of stock-index futures, single-stock futures, equity options and stock-index options for June — known as quadruple witching — created exceptional volatility, pushing the S&P 500 to swing more than one per cent from its session low to its intraday high.
Greece kept a pall over investor sentiment, even though experts say US banks’ exposure to Greek debt may be smaller than many market participants fear.
Still, the market needs resolution of the situation soon, as the lack of a deal to resolve the Greek debt crisis stifles investor confidence and curbs the market’s advance.
“The big headline is Greece, and it’s going to continue to be Greece until there is some clarity or conviction that comes out of there,” said Jonathan Corpina of Meridian Equity Partners in New York.
Losses were contained, however, as investors looked for value after the recent sell-off. The Dow finished the volatile day with a modest gain and the Nasdaq retraced some ground after falling slightly more than one per cent in late afternoon trading.
The S&P materials sector lost 0.9 per cent, reflecting a slide in copper prices amid concerns that the US economy may be slowing. Freeport-McMoRan Copper & Gold shed 1.4 per cent to $47.85.
The Dow Jones industrial average gained 64.25 points, or 0.54 per cent, to 11,961.52. The Standard & Poor’s 500 Index added 2.22 points, or 0.18 percent, to 1,267.64. But the Nasdaq Composite Index dropped 7.76 points, or 0.29 per cent, to 2,623.70.
The S&P 500 has dropped seven percent from its April 29 closing high.
The benchmark S&P 500 Index appeared to bounce back from a technical support test at 1,257.88, its 200-day moving average, recovering from an intraday low of 1,258.07.
Quadruple witching is a term used by pros to describe the quarterly expiration and settlement of four types of June equity futures and options contracts — an event that can add volume and volatility as investors adjust their derivatives positions.
The two-day event begins when June stock-index futures and certain options on the cash indexes such as the S&P 500 and the Nasdaq 100 stop trading at Thursday’s close. These contracts then settle on Friday’s morning opening.