Analysis-Funds selling options help temper US stock swings
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Assets under derivative income ETFs have grown to about $71 billion from $33 billion at the end of 2022. Some options-selling strategies have tempered stock gyrations and contributed to a long period of market calm. Options-selling ETFs generate income by selling out-of-the-money call options against their stock holdings. Market makers often hedge their exposure to these contracts by selling stock index futures. When markets grind higher, the ETFs buy back the call options they sold, prompting market makers to close their own hedges by buying index futures, thereby supporting stocks. While these strategies moderate market moves, they alone would probably not prevent a selloff if the outlook for stocks radically changes. The presence of volatility-selling funds has been one moderating force in keeping volatility low over the last few years. However, if these strategies were to be hastily unwound, it could lead to increased volatility and uncertainty in the market.

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https://www.investing.com/news/economy/analysisfunds-selling-options-help-temper-us-stock-swings-3372419