Opinion: Tens of trillions of dollars in options expiring will trigger two weeks of volatility in the US stock market

BlockBeats News, June 18 — Scott Lubna, head of stock and equity derivatives strategy at Castle Securities, stated that the U.S. stock market may experience a period of increased volatility over the next two weeks, but this is more due to technical factors rather than fundamental changes. He pointed out that starting June 19, the market will face the largest options expiration in history, combined with quarter-end pension portfolio rebalancing and concentrated adjustments in major investor positions.

He referred to this phase as one of the "most critical technical periods of the year," where the importance of capital flows will be significantly higher than fundamental factors. Despite short-term disruptions, Lubna still recommends investors view the volatility as a "technical phenomenon" and to buy on dips during market pullbacks. He believes that once the upcoming two weeks and quarter-end pass, the market environment will improve noticeably.

Lubna said that retail investor behavior is changing: "Unlike in the past when they only chased high-risk assets, retail investors are increasingly focusing on companies aligned with institutional allocations that can drive benchmark index performance." More importantly, U.S. households currently hold record levels of cash, waiting to enter the market during a correction. He pointed out that this capital characteristic usually only changes when the Chicago Board Options Exchange Volatility Index (VIX) rises above 30, but currently, the VIX is around 16, still at a relatively low level.

Supported by multiple sources of capital, Lubna believes that the main theme for the U.S. stock market in the second half of the year remains "upward."