Was Jan 24th a canary in the coal mine?

On January 24th, 2022, the S&P 500 was falling hard and more and more puts were bought on the way down, exacerbating the already heavy negative gamma situation from the LEAP options expiry on the 21st. Many people have since claimed that the supposed Plunge Protection Team (PPT) stepped in and sold $50B in puts to force market makers (MMs) to hedge by buying up shares, halting the drop and squashing the VIX (which was damn high apparently).

Tapering of Quantitative Easing (QE) by the FED caused the bond purchasing minimum to be 50% in Feb as compared to Jan. The monthly options expiration for Feb is coming up and after the FAANG earnings vs. stock price debacle recently, stocks in FAANG are trading below their max pains. Also, the put to call ratio on the SPY is only going up as one looks through options expirations over the next two weeks.

After the December Federal Open Market Committee (FOMC) meeting, Powell gave his speech outlining rate increases coming in 2022 and 2023. Nothing happened with the market. Three weeks later when the minutes for the SAME MEETING were released, the market dumped a bit. Similarly, Jan 25-26th meeting, Powell gave his press conference and even an early text release of his speech and the market was fine. The meeting minutes for that meeting will be probably released on Feb 16th (as they tend to lag 3 weeks before releasing them). What will the market do?

The supplemental liquidity deposit period for monthly options expiration, under old rules, starts on Feb 16th. The newer rules allow new requests to be made through to two trading days after expiration, so Feb 23rd (21st NYSE holiday). BTW, this also applied to Jan 24th and 25th.

So, Jan 24th could have been a massive correction (technically the S&P500 was down $400 from $4600 to $4200 or so during the SLD period around Jan 21st options expiration) but was supposedly stopped. A crisis averted, but a canary no less?

What do you think about February monthly options expiration Feb 18th, where this all appears to be poised to repeat? What about March? QE is supposed to baseline to $0 minimum purchased bonds and (commercial) mortgage backed securities, and the first (of four in 2022) expected rate hike of 0.25% is probably slated for March.

I have no background in finances or financial practices and nothing of what I say is advice, just some observances and questions for others who have more experience in this stuff.


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