Quadruple Witching: Definition and How It Affects the Market

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zipink
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Joined: Sun Apr 03, 2011 9:02 pm

Quadruple Witching: Definition and How It Affects the Market

Post by zipink »

What It Is:

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.

How It Works/Example

Although futures and options generally share simultaneous expirations on the third Friday of every month, quadruple witching 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.

On quadruple witching 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 capitalizations.

Why It Matters:

Quadruple witching 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.

Source from investinganswers.com
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wemakebread
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Location: Singapore

Post by wemakebread »

Thanks for sharing, zipink!

First time I heard about quadruple witching.
Seem to refer to the same days as triple witching.

If I am not mistaken, high volatility can even happen during the week leading up to freaky Friday. The volatility also tends to hurt short-term traders a lot more than long-term investors.
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