Friday could be a wild day of trading on Wall Street. Here’s why

Wall Street could face a volatile end to the week as investors brace for what Goldman Sachs says will be the largest option expiration on record.

Options expiration days are a monthly event on Wall Street where contracts for short-term derivatives expire. Friday is one of the rare times (four times a year) that options on four types of securities expire on the same day: index options, single stock options, index futures, and index futures options. This is called the day of “quadruple witchcraft”.

More than $7.1 trillion in notional options exposure is expected to expire this Friday, according to Goldman; This includes approximately $5 trillion. S&P 500 index and $880 billion is tied to single stocks. The firm said December options expiration was typically the largest of the year, but that eclipsed all previous records.

To put the scale in context, options expiring Friday represent notional risk equal to about 10.2% of the Russell 3000’s total market cap, Goldman said.

This dynamic can lead to choppy trading, especially around the S&P 500’s heavily watched levels, according to Jeff Kilburg, founder and CEO of KKM Financial.

“I expect volumes to be well above normal as options traders finalize their 2025 profits and losses,” Kilburg said. “But it looks like most of the repositioning has already occurred. 6800 is a big strike price on the S&P and we’ll see if the bulls can hold that level after pushing the market back above that level this morning.”

The S&P 500 was trading around 6,770 on Thursday, up about 15% this year.

While volumes and volatility may increase in the broader market, some individual stocks with large short positions may see a different scenario. If options traders who hedge their positions are sitting on a large amount of in-the-money options, activity due to those contracts expiring may actually calm price fluctuations rather than intensify them. “Out-of-the-money” options have strike prices equal to the current price of the underlying asset.

As traders adjust their hedges, prices may retreat toward heavily traded strike levels, a phenomenon known as “pins,” and stocks may hover near key levels at the close, Goldman noted.

“This situation is often referred to as a ‘pin’ and can be an ideal situation for a large investor trying to enter/exit a stock position,” Goldman said.

Stocks with options expiring on Friday that represent a large portion of typical daily trading volumes and may be prone to “fixing” include: GeneDx Holdings, BILL Holdings, Avis Budget Group And GameStopcompany found.