Gentle Steps on the "Four Witches Day" Amid US Tailwinds

On the 11th, dealers are working in the Hana Bank dealing room in Euljiro, Seoul, where the KOSPI index is showing an upward trend in the early session. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] The domestic stock market is successfully passing through the 'Quadruple Witching Day' for the first time this year. The market is showing strength, relieved from the burden of expiration dates, thanks to favorable winds from the U.S. The supply and demand of spot stocks due to the liquidation of individual stock futures positions is being observed as a key point.

On the 11th, the KOSPI opened at 2,964.30, up 6.18 points (0.21%), and is expanding its gains. Despite the recent trend of increased volatility due to rising market interest rates influenced by inflation, and the coinciding expiration dates of stock index futures, stock index options, individual stock options, and individual stock futures, the market showed a smooth start. Typically, on this day, liquidation sales for each product can increase market volatility more than usual.

However, in this case, the individual stock futures market is undervalued compared to spot stocks, and arbitrage trading is believed to be occurring due to the approaching expiration date. Stocks that are undervalued beyond the transaction tax (0.23%) and have futures open interest higher than the 20-day average trading volume fall into this category. These include Doosan Infracore, LG Display, GS Construction, KT, Netmarble, LG Household & Health Care, and Celltrion Healthcare. All of these stocks are currently rising. Laborngil, a researcher at NH Investment & Securities, stated, "For this group of stocks, we can expect net buying inflows in the spot market in the form of position liquidation near the closing price on the futures and options simultaneous expiration day."

In the case of KOSPI 200, a limited selling dominance is expected. Since the spread price of KOSPI 200 futures is low, it is advantageous to maintain a buying position. Jeong Inji, a researcher at Yuanta Securities, observed, "Currently, financial investors are rolling over (monthly contract replacement) to maintain buying positions, and foreign investors, who are currently selling, are gradually turning to buying, so market shocks are expected to be limited."

However, given the weakened stamina of the KOSPI, there is a possibility that various factors could have a significant impact. Jeon Gyun, a researcher at Samsung Securities, predicted, "With the liquidation of dividend-linked arbitrage positions at the end of last year and the possible liquidation of positions due to the termination of mini KOSPI 200 futures creation, a selling dominance by financial investors is expected," adding, "Even with limited selling dominance, market volatility may increase."

This content was produced with the assistance of AI translation services.