The Quad Witch Glitch: Here's Why Stocks Soared Into This Morning's Open

In case you wondered why markets exploded higher in the pre-open, here's a simple answer.

Thanks to the huge weight of gamma in options contracts tied to the December expiration futures contract, that contract literally exploded higher by 10 S&P points in the 10 minutes before the cash market open (no there was no news or macro catalyst at all), as market-makers were forced to buy into the rip to balance their books as time-value collapsed.

The entire market then repriced on the basis of the December contract's exuberance with ETFs and futures all surging higher along with it. But the second that the December contract matured, the March contract began to sell back down...

Source: Bloomberg

So, there we have it again, the options market 'tail' is wagging the US equity market 'dog' once again.