S&P 500 Slumps as $4.5 Trillion of Options Expire on March Quad Witching

Also, 10-year T-note, silver, crude oil and Japanese yen futures

1. S&P 500 E-mini futures (/ES): -0.87% 
2. 10-year T-note futures (/ZN): +0.2% 
3. Silver futures (/GC): -1.21% 
4. Crude oil futures (/CL): -0.59% 
5. Japanese yen futures (/6J): -0.04% 

About $4.5 trillion of options are set to expire today as quad witching Friday has arrived. A quick scan of order flow shows top of book depth in the equity index futures is fairly light, which may be setting us up for a day of meaningful two-sided action. The sell-off in stocks is helping bonds find new favor after yesterday’s ugly reversal, while traders have likewise jettisoned some of their metals positioning (although given the year-to-date performances, it would appear to be profit-taking tied to today’s options expiries).  

S&P 500 futures (/ESM5) fell nearly 1% this morning, but prices are on track to record the first gain in over four weeks. FedEx (FDX) fell 10% in pre-market trading after the global shipping company cut its profit outlook. Nike (NKE) fell 8% ahead of the bell after the company warned that tariffs could hit the business. Tesla (TSLA) was slightly weaker this morning after receiving a downgrade from Morgan Stanley’s Adam Jonas. 

The risk-off tone to end the week is pushing yields lower, as growth concerns move back into focus after the weak corporate results from Wall Street. 10-year T-note futures (/ZNM5) rose 0.14% in early trading. The underlying yield is now trading at 4.214%, which is near a floor in place since October. Traders will shift their focus to inflation data next week via the personal consumption expenditures (PCE) index.  

Silver futures (/SIK5) fell 0.86% in early trading. The metal is on track to snap a two-week win streak, with prices down 2% from the start of the week. The May contract is now trading at its 21-day exponential moving average (EMA), which aligns with a swing high from earlier this month. The divergence from gold prices has pushed the gold/silver ratio above 91, near the highest level since September 2022. That said, it might be a good time to get long the metal for traders who believe that the dollar decline will resume next week.  

Crude oil futures (/CLK5) fell today but prices are on track to record a second weekly gain. The losses this morning come despite newly announced U.S. sanctions on Iran that target the country’s oil exports. President Trump has vowed to destroy Iran’s oil export business, and the new round of sanctions is the fourth levied by the new administration. Meanwhile, OPEC is moving to enforce production quotas that could see the group produce less oil going forward despite a pledge to release more spare capacity starting next month. Still, with the growth risks facing the global economy, the risk to oil remains skewed to the downside.  

Japanese yen futures (/6JM5) trimmed overnight losses to trade nearly flat going into the U.S. trading session. Prices held above the 21-day EMA after bulls defended prices earlier this week at the early February swing high. Technically, the uptrend for the yen remains in place, and the policy divergence between the Fed and the Bank of Japan (BOJ) is expected to remain supportive for yen buying.  

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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