What Is Quadruple Witching?

Conversely, when other factors coincide with Quadruple Witching, it can lead to some dramatic activity. It is interesting and important to note, while there is an increase in volume, the volatility is more or less within expected behavior. That is, the overall market’s volatility.

With the increase in various hedging instruments (such as single stock futures), and having multiple expiration dates throughout the year, the effect on the overall market, specific to Quadruple Witching, has decreased. Individual stocks may experience higher degrees of volatility, but the market as a whole tends to be slightly bullish on the week, if anything. The increase in volatility of the markets is typically seen the week after Quadruple Witching.

Volume on Quadruple Witching has been greater than average roughly two-thirds of the time, going back to 2005. Volatility, however, specifically the range between the highs and lows, has only been greater than average about one-third of the time over the same period.

Since in nearly every case of increased volatility, you saw an increase in volume, one could say that if there’s an increase in volume, you are just as likely as not to see an increase in volatility.

quadruple witching day

Quadruple Witching Examples 

In September of 2008, in the midst of the housing collapse, volume on Quadruple Witching was over 1.5 times greater than average – but had more than 4 times greater volatility. During the crash at the end of 2018, there was roughly double the volume and volatility in December of that year. In March of 2020, at the start of the worldwide pandemic, there was an increase in volume and volatility between 2.25 and 2.5 times the average.

While that may be no surprise to anyone, it is interesting to note that there was roughly 1.5 times the volatility and nearly 3 times the volume the preceding Quadruple Witching day, December 2019.

Barring those incidents, however, the majority of the time, while volume may have been higher than normal, the volatility of the overall market was at or even less than normal levels.

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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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