Triple Witching Explained: Dates, Strategies, Impacts & How to Profit

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More often, traders will use terms such as “triple witching,” which is the expiration of stock options, index options, and index futures on the same day. This event occurs on the third Friday of March, June, September, and December. Triple witching does not include all of the stock index futures and options contracts, so even though they are the most talked-about expiration events, they are not the only expiration days. Short-term traders should adapt their strategies to these conditions, avoid trading, or reduce their position size if they notice their performance deteriorates during this time.

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Triple witching occurs when three types have expiry dates scheduled for the same day. Typically, this phenomenon occurs on the third Friday of the last month in a quarter. Triple witching may be a good trading opportunity or largely a non-event, depending on how you approach the market. But this compensation does not influence the information we publish, or the reviews that you see on this site.

Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. As contract expiration deadlines approach the witching hour, trading activity usually surges as market participants rush to close or roll over positions before it’s too late.

Triple vs. Quadruple Witching

Triple Witching is a significant event in the world of finance, and it can have a substantial impact on the stock market. In this article, we explore what Triple Witching is, how it works, and its potential impact on the stock market. For you as an equity investor, it’s statistically favorable to buy this particular stock close to the end of a Triple Witching Day. You can use this effect as a trader, but also as a long-term investor, to improve your entry timing.

Quadruple Witching

Triple witching is a term that refers to the third Friday of March, June, September, and December, when the quarterly expiration of stock options, stock index futures contracts, and stock index options contracts all occur on the same day. Triple witching can influence individual stocks such as those with large options or futures contracts set to expire. As traders adjust or close their positions, there can be unusual movement in the stock’s price and volume. This is usually more pronounced in stocks with smaller market caps or those that trade heavily in the derivatives market. Caution is in order at this time since these price changes don’t often reflect shifts in the underlying company’s fundamentals. Triple-witching days generate more trading activity and volatility since contracts allowed to expire cause buying or selling of the underlying security.

Stock index options give the holder the right to buy or sell a stock index at a specific price on or before the expiration date. As one part of triple witching, traders are closing out or exercising their stock options. For example, traders may be closing options positions, selling to close a long contract or buying to close a short contract. If they have a hedge on these positions using stock, they may also be simultaneously unwinding that hedge, buying or selling the corresponding stock as appropriate.

• The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and fixed income can be substantial.
• Triple Witching days, with their unique blend of volatility and opportunity, underscore the dynamic nature of financial markets.
• The fourth type of contract involved in quadruple witching, single-stock futures, hasn’t traded in the U.S. since 2020.
• Triple witching is simply the term given to four unique trading days each year.
• Some traders tend to be superstitious, believing that these days bring bad luck or are a precursor to unfavorable market shifts.

For additional information about rates on margin loans, please see Margin Loan Rates. In this way you can see at a glance what the typical course of Apple share prices look like around the Witching Days. My primary focus was on understanding the impact on individual stock investments.

Thus, volatility frequently spikes during this frenetic final trading hour across the derivatives markets and their underlying assets, as speculative plays and hedging activities spill over to equities to whip up the market further. The primary reason for the increased action on witching-hour days is that if the contracts are not closed before expiration, that could mean having to buy or sell the underlying security. For example, futures contracts that are not closed require the seller to deliver the specified quantity of the underlying security or commodity to the contract buyer. Options that are in the money, that is, profitable, may mean the underlying asset is exercised and assigned to the contract owner. In both cases, if the contract owner or contract writer can pay for security to be delivered, the contract must be closed out before expiration. Options traders also find out if their options expire in or out of the money.

How Triple Witching is Different from Quadruple Witching

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In financial markets, the “witching hour” refers to the last trading hour on the third Friday of each month, when options and futures on stocks and indexes expire. This period is characterized by heavy trading volumes and increased volatility as investors rush to close or roll over positions before the end of the trading day. Double, triple, and quadruple witching can occur when two, three, or four asset class contracts expire simultaneously. These events, particularly triple witching, can be forex broker particularly volatile because of the concentration of expiring contracts.

The decline into March undercut the breakout level before an April recovery wave remounted support. The fund completed a volume-supported V-shaped recovery pattern in June, returning to the prior high and adding another 12 points into June 10’s all-time high at $248. The fund has given up about 16 points and failed the breakout in the past three sessions, reinforcing resistance in the upper $230s. A test at that level during the next uptick could be instructive, with a buying spike reinstating the breakout, while a reversal would drive another nail into the rally coffin. The fund completed the breakout in October, entering a strong uptrend that posted an all-time high at $339 in February.

The world of finance is filled with colourful jargon, and “triple witching” is no exception. While it might sound like something out of a Harry Potter novel, it’s actually a Forex trading 24 hours significant event in the stock market that occurs four times a year. Triple witching can bring a surge in trading activity and volatility, making it a time of both opportunity and caution. By the end of trading on that third Friday, investors must decide whether they’re going to hold their contracts through the close (with a potential exercise of the contract) or close them out. Traders may be closing out stock and index positions, closing out a hedge position matched to a contract or raising cash from other positions to fund their purchase of a contract’s deliverable. Writers and holders of futures and options contracts must exit their positions to avoid stock assignment if their position is in-the-money.