LONDON, Feb 21 (Reuters) - Wall Street stocks could be

facing a correction because of ructions in the options market,

Goldman Sachs ( GS ) specialist Scott Rubner said in a Thursday note

seen by Reuters on Friday.

Roughly $2.7 trillion of U.S. stock market derivatives are

due to expire on Friday, which if not exercised, will put

pressure on stock markets and stoke volatility, the note said.

WHY IT'S IMPORTANT

S&P 500 and European stock markets hit a record highs on

Tuesday but have since declined amid Trump's latest tariff

warning on pharmaceuticals, semiconductor chips and wood, which

among other threats, has exacerbated fears of a broad trade war

and unnerved investors.

Stock buying might be slowing for other reasons, as well.

Retail traders in the U.S. are trading less because they'll have

to pay their annual taxes, and average flows from retirement

funds into mutual and exchange-traded funds typically taper in

March, Rubner said.

BY THE NUMBERS

About $2.7 trillion of equity options, or derivatives that

allow a trader to bet that a stock will reach a certain price,

expire Friday, said the Goldman note.

These derivatives include wagers on the S&P 500, as

well as U.S. exchange-traded funds and single stocks.

Banks and intermediaries that help put on these bets have

over $9 billion of hedges against these trades. These positions

have acted as a dampener on volatility, says the Goldman note,

"supporting weakness and muting rallies."

KEY QUOTE

If investors do not return to renew their options bets, then

intermediaries also have to unwind their hedges, explains Dan

Izzo, founder of the hedge fund BLKBRD Asset Management and a

former bank trader.

"That translates as a large momentary pressure. The larger

risk is if there's no one willing to buy that impact, we could

see it trigger a larger sell off," said Izzo.