On Friday, September 20th, local time, it is the ninth options expiration date of 2024 in the United States and the last "Quadruple Witching Day" before the U.S. presidential election, with Goldman Sachs warning of significant market volatility.

"Quadruple Witching Day" refers to the expiration and delivery of stock index futures, stock index options, stock options, and single stock futures all occurring on the same day.

According to Goldman Sachs statistics, from September 18th to September 20th, local time, there are approximately $4.5 trillion worth of options expiring, setting a new record for September in previous years.

It is worth noting that among these $4.5 trillion options, about $2.6 trillion are regular September options of the S&P 500 index, with the remainder distributed across ETFs and individual stocks.

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This volume is sufficient to create a storm in the U.S. stock market.

The continued growth of the U.S. stock volatility market in recent years has been remarkable.

Goldman Sachs trader Brian Garrett pointed out in the latest research report that the U.S. stock market currently trades 50 million options per day, far higher than the 20 million per day in 2018.

After these options expire, it is expected that the volatility of the U.S. stock market will continue to decline until the end of the quarter.

Garrett believes that although the S&P 500 index is at a historical high, investors do not seem to have fully laid out call options, and the market has not seen a rush to buy call options under the "fear of missing out" sentiment.

He reminds investors that considering the "Black Monday" on August 5th and the global financial crisis in 2008, the seasonal volatility in October should not be ignored.

Currently, the cost of hedging is very low, and if market makers are willing to construct spreads, the cost is even lower (demand for put options on the S&P 500 index).

Given the surge in "volatility coverage" products, S&P 500 option market makers rarely experience negative gamma situations.

Negative gamma is usually associated with the sale of options, and when traders sell options, they take on the risk of negative gamma, which means that as the price of the underlying asset changes, their option Delta value (a sensitivity indicator of the option price change relative to the price change of the underlying asset, ranging from -1 to 1) will accelerate against them.

However, at the current spot price, Goldman Sachs models show that the market has a negative gamma exposure of 50 million S&P index contracts.

This means that if the S&P index experiences significant fluctuations, the negative gamma exposure could lead to market makers and option sellers conducting a large number of trades to hedge risks, which could further exacerbate market volatility.

This dynamic will change after expiration, and the status of traders will shift from a small negative gamma to a considerable positive gamma.

Historically, when the market turns to negative gamma, the likelihood of a short-term rise in U.S. stocks increases.

Garrett also observed that as the global market gradually adapts to derivative trading, investor behavior has changed significantly after market fluctuations.

In the past, market sell-offs would stimulate demand for upward Delta, achieved through call options.

However, in recent years, some of the "upward Delta" demand has shifted from stock upside to VIX put options.

The recent VIX SQs event witnessed the largest volume of VIX put options expiring in history, most of which occurred after August 5th.

In his view, this will lead to a structural increase in the volatility of volatility (vol of vol) during periods of market stress.

Based on the current level of volatility and previous asset trends, Garrett believes that the best "volatility-adjusted" hedging tools include HYG (High Yield Corporate Bond), XOP (SPDR Oil & Gas Exploration ETF), XLF (SPDR Financial Select Sector ETF), and XLE (SPDR Energy Select Sector ETF).

The market's implied volatility is low enough to utilize Delta in either direction, and Garrett is inclined to buy index put options here—low volatility, high catalysts, and overall positioning is light.