The reason for the U.S. stock market’s super-dramatic V-turn was found: Mysterious customers sold put options and short-squeezed

The U.S. stock market saw a dramatic V-turn in intraday trading on the 24th. The Dow Jones Industrial Average fell by more than a thousand points and then turned red and closed higher. Experts point out that options of up to $3.1 trillion will expire on the 28th. On Monday, a large number of put options were sold during the session, which may be the main reason for the sharp reversal of U.S. stocks.

Zero Hedge reported on the 24th that this Friday’s option expiration date is very special. Because as the day gets closer, the number of put sales has hit a record high, some expiring on Friday and some not.

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SpotGamma released an after-hours review report and pointed out that a large number of option transactions emerged in US stocks at noon on the 24th (just after the European stock market closed), which was the catalyst for the V-turn of US stocks.

The chart shows that a famous mystery guest suddenly sold put options at noon (brokers also suddenly changed from selling S&P 500 futures to buying), which slowed down the selling speed of brokers, and then switched from selling to buying. A massive short squeeze followed, prompting V to close higher.

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The report pointed out that from 12:00 to 3:00 ET on the 24th, the delta value of the put option turned positive, driving the market, and brokers also rushed to cover the safe-haven position of the put option. This prompted the panic index “VIX” to suddenly drop from 38.94 points to 29 points a few hours later, which in turn drove countless vol targeting funds to join the frenzy buying ranks.

It is worth noting that, Reuters reported on the 21st, Options Solutions published a research report that this Friday, a stock option of up to 1.28 trillion US dollars will expire. At that time, U.S. stocks may fluctuate wildly. The expiring option accounts for nearly 40% of the overall open interest, the report said.