"Quadruple Witching Day" is coming! Are US stocks about to see record volatility?

Bloomberg News has learned that Goldman Sachs’ latest research report indicates that the U.S. stock market is currently at a critical point where “collapse” and “short squeeze” coexist. This also suggests that since the U.S./Israel airstrikes on Iran at the end of February triggered a new wave of Middle East geopolitical turmoil, global stock market volatility may intensify further. There is even a possibility that the U.S. stock market could experience record-breaking sharp fluctuations during this week’s “Quadruple Witching” day.

Under the combined effects of ongoing Middle East conflict uncertainty, high oil prices, and the concentration of derivatives expirations this week, short-term volatility in global markets is likely to further amplify. If the situation in the Middle East does not see a substantial breakthrough in the very short term, the U.S. stock market may hit record volatility during Quadruple Witching, with global markets following suit and becoming increasingly turbulent.

Quadruple Witching occurs on the third Friday of March, June, September, and December, known for causing surges in trading volume and sudden, intense asset price swings, often accompanied by large-scale rollovers and liquidation of old positions. Trading volumes on these days tend to spike, especially in the last hour, as traders significantly adjust their portfolios. Since the end of 2020, when single-stock futures trading in the U.S. officially ceased, the term “Quadruple Witching” has become more symbolic, with “Triple Witching” (simultaneous expiration of stock index futures, index options, and stock options) better reflecting actual trading conditions.

“The high volatility is a common enemy for all professional traders,” this statement is especially true in the current environment. The high volatility environment is expected to persist at least in the short term. The real damage to professional funds isn’t just the difficulty in judging market direction but also the simultaneous rise in hedging costs, reduced tolerance for holding positions, compressed leverage efficiency, and the possibility that even correct fundamental analysis may be overtaken by poor timing. In other words, traders are now facing multiple layers of noise—such as gap-up oil prices, frequent reversals in the market, systemic rebalancing, private equity credit, and AI panic—rather than a single trend.

“Collapse risk” and “short squeeze risk” coexist at a critical juncture

Currently, hedge funds and institutional investors are maintaining extreme long positions in certain stocks while heavily shorting via ETFs and stock index futures, pushing the short exposure in the U.S. stock market to its highest since September 2022. This abnormal position structure means that as long as geopolitical tensions worsen, the market is more prone to downside imbalance. Conversely, if a major positive catalyst suddenly appears, it could trigger an “extreme rebound.”

The Iran conflict and soaring oil prices are prompting institutional funds to withdraw from risk assets in the U.S. stock market at near “historical extremes,” pushing the market into a highly fragile critical zone. Goldman Sachs data shows that during the week of March 3-10, global asset managers sold a net of $36.2 billion in S&P 500 futures, the largest weekly reduction in over a decade; simultaneously, short positions in U.S.-listed ETFs surged to a three-year high. These indicators suggest that the current activity is not just defensive repositioning but a systemic de-risking operation involving futures reduction and ETF shorting, reflecting high alertness among institutions to geopolitical shocks, re-inflation of oil prices, and market fragility.

The market is at a “collapse” and “short squeeze” critical point: on one hand, if tensions with Iran do not ease significantly in the next two weeks, extreme positions and worsening sentiment could push stock indices further down; on the other hand, since institutional net long positions have not been fully cleared and massive short positions have accumulated, any signs of easing could quickly trigger a fierce short covering rally. In other words, the most dangerous aspect of the current U.S. stock market isn’t the direction being set but the uncertainty of the direction amid extreme positioning. The key to future trends remains whether the Middle East situation can see a substantial breakthrough in the short term.

The “high volatility chapter” in global markets is not over

Due to limited diplomatic progress, uncertainty surrounding the conflict continues to heavily suppress global financial markets. Before markets return to relative calm, they are likely to experience several weeks of intense volatility and turbulence. Some options traders believe that the most turbulent period of market swings could last about a week or even a month after the leaders of the world’s two largest economies meet, before returning to more normalized trading.

Unless the Middle East situation shows clearer, verifiable signs of de-escalation, oil prices fall significantly, and systemic selling pressure is temporarily relieved with macro risks being actively absorbed, global stock markets are more likely in a high-volatility price discovery phase rather than a stable trend phase in the short term.

Senior Wall Street traders and some institutional investors believe that the current high volatility in global equities will at least persist in the short term (the next month). The more realistic baseline scenario isn’t a “one-sided crash,” but rather “repeated large swings up and down under high oil prices,” and this intense volatility could continue even before the market’s first expected ceasefire in the Middle East (around June 30).

As the military conflict between the U.S./Israel and Iran continues, global financial markets remain volatile. Investors are highly uncertain about when a potential ceasefire might occur, and market bets on the timing of a ceasefire have shifted significantly later—from the end of March to the end of June or even December. Ongoing military-level attacks near the Strait of Hormuz—one of the world’s most critical shipping corridors—continue to heighten concerns about disruptions to global trade, rising inflation, stagflation pressures, and increased market volatility.

Data from the betting platform Polymarket shows that traders generally believe a formal ceasefire is more likely to occur in June or later this year, rather than in the near term as some optimistic Wall Street analysts expect. According to Polymarket’s probability estimates, the chance of a ceasefire before June 30 is 59%, and before December 31 is 77%, while the probability of reaching a ceasefire by the end of March is much lower.

The market is not in a “panic bottoming and waiting for recovery” phase but is instead in a prolonged sell-off driven by geopolitical tensions, with oil prices back above $100, and asset prices continuously eroded. Goldman Sachs trading chief Rich Privorotsky believes the real issue isn’t whether sentiment has become pessimistic but that the fundamentals continue to worsen—such as the partial blockade of the Strait of Hormuz pushing up energy costs, rising U.S. Treasury yields, slow bleeding in the stock market, and weak rebounds in emerging markets. This indicates that the market currently lacks a clear exit to stabilize and rebuild risk appetite. In short, technicals and positioning might support a very short-term rebound, but the macro trend remains bearish.