Nasdaq · September 3, 2020

The options-fuelled run unwinds

-4.96%

single-day change vs previous close

What happened that day?

On 3 September 2020 the Nasdaq fell 4.96%, one day after a record close
Big tech had risen almost without pause all summer, on the expectation that lockdowns would grow every online business
On top of that came heavy option buying — money crowding into the side that pays off when a stock rises
Whoever sold those options bought the actual shares to limit their risk. So option buying pushed the shares up again, in a loop
The loop runs backwards too. When prices turned, those hedges were sold back, and the fall got bigger
It later emerged that a Japanese investment company had been buying big-tech options in size that summer
From the peak the index was down 11.81% before setting new highs again by year end

Sources

Every figure on this page is recomputed from the original daily closing prices and checked against them at build time. The account of what happened is written from the sources listed above.