Goldman Sachs expert Scott Rubner has cautioned that Wall Street stocks may face a downturn, citing growing instability in the options market as a key factor behind his prediction.
What Happened: According to a note from Scott Rubner, the stock market could come under pressure as nearly $2.7 trillion in U.S. stock market derivatives approach expiration, reported by Reuters on Friday. If these contracts remain unexercised, heightened volatility may follow.
Rubner also highlighted additional factors that could slow stock buying, including the impending annual tax payments by U.S. retail traders and the seasonal decline in retirement fund contributions to mutual and exchange-traded funds in March.
Approximately $2.7 trillion in equity options were set to expire on Friday, covering bets on the S&P 500, U.S. exchange-traded funds, and individual stocks. According to a Goldman Sachs note, banks and intermediaries holding over $9 billion in hedges for these trades have helped stabilize market volatility.
Dan Izzo, founder of hedge fund BLKBRD Asset Management and a former bank trader, explained that if investors fail to renew their options bets, intermediaries will be forced to unwind their hedges. This creates significant short-term pressure. The bigger risk is if “no one willing to buy that impact, we could see it trigger a larger sell off,” Izzo warned.
Why It Matters: Although the S&P 500 and European stock markets reached record highs on Tuesday, they have since retreated. The decline is partly driven by President Donald Trump‘s tariff warning on pharmaceuticals, semiconductor chips, and wood, fueling trade war concerns and rattling investors.
The tariffs imposed by the Trump administration raised concerns for many giants including Apple Inc. (NASDAQ:AAPL), and Nvidia Corp. (NASDAQ:NVDA), among others.
In a poll conducted by Benzinga, 35% of the respondents believed that Apple would see maximum impact from Trump’s tariffs due to its reliance on Chinese supply chains. Most respondents also feel that these plans could provoke retaliation from other nations. Analysts at the Bank of America securities have suggested that Apple may need to increase iPhone prices by 9% to counter the tariffs.
Meanwhile, the SPDR S&P 500 ETF (NYSE:SPY) and the Dow Jones Industrial Average both tumbled 1.7% on Friday, recording their steepest single-day losses since Dec. 18. At the same time Invesco QQQ Trust (NASDAQ:QQQ) ended 2.07% lower, according to data from Benzinga Pro.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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