Understanding Quadruple Witching

By September 13, 2016 Newsletter No Comments

Quadruple witching refers to the third Friday of every March, June, September and December. On these days, market index futures, market index options, stock options and stock futures expire, usually resulting in increased volatility. 

Although futures and options generally share simultaneous expiration on the third Friday of every month, These days only occur four times a year. The last hour of these trading days, from 3:00 to 4:00 p.m. EST, is referred to as the quadruple witching hour. 

quadruple witching

On these days, and especially during quadruple witching hours, many investors attempt to unwind their futures and options positions before the contracts expire. This activity frequently includes repurchasing contracts and closing out position market capitalization. 

These days are usually accompanied by considerable volatility in stock and derivative prices, as well as increased trading volume. As a result, investors can anticipate and plan for the potential effects of these relatively turbulent trading days. 

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