What Is Quadruple Witching?

Futures contracts expire quarterly, while options contracts expire monthly. Whichever month it is, it happens on the third Friday of the [expiration] month. So while options expire every month, futures only expire in March, June, September, and December. It is when all four contracts expire on the same day that you have Quadruple Witching.

Therefore, you would have Quadruple Witching the third Friday of March, June, September, and December of every year. You would see the “quadruple witching hour” the very last hour of trading on those days.

Effects on the Market

There are many reasons institutions or individuals decide to get into, or out of, a particular trade. Some trades are very short-term, while others may be medium- to long-term. Not all positions will be profitable by expiration, nor will everyone want to exit their positions at expiration. As a result, there is a lot of activity on those days as traders try to close, roll-out, and/or offset their positions.

Other traders, knowing the increase in supply and demand, may try to take advantage of price imbalances during these times. This practice is known as arbitrage, and while it can be profitable, it also can be quite risky.

Over the past 15 years, there is a statistically significant increase in volume specifically on the day of Quadruple Witching, but also the week of the event as compared to the previous 50 trading days. However, not all Quadruple Witching days/weeks experience an increase in volume, with some even experiencing a dramatic decline as compared to the previous 50 trading days.

This is because, like it or not, the markets are affected by more than just when contracts expire. There could be economic news or other world events that cause a reaction in the markets. Some of these may be positive, while others may be negative. In many such cases, traders have already done what was needed prior to expiration, so those days are rather light in comparison.

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Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

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