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The Tell: Blame options expiration, not politics, for stock-market pullback: analyst

Don’t blame politics for the stock market’s turn south on Monday. The stage was set in the options market at the end of last week, says Marko Kolanovic, the widely followed head of derivative and quantitative strategies at J.P. Morgan Chase & Co.

In a Tuesday note, he reminded clients that he had previously warned that the expiration of options could “lift the lid” on subdued market volatility and put downward pressure on stocks.

Friday marked the quarterly “quadruple witching” event, in which options on individual stocks, stock indexes, stock-index futures and single-stock futures simultaneously expire.

After expiration, Kolanovic says the put-call “gamma imbalance” shifted toward puts, which give holders the right but not the obligation to sell the underlying instrument at a set price by a certain time, for the first time in around five months.

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