Triple Witching


Triple Witching Friday happens on the third Friday of every third month (March, June, September, and December), and is the simultaneous expiration (or rollover) of various futures and options contracts. These contracts include some of the stock index futures, some of the stock index options, and the individual stock options. The simultaneous expiration of the three types of markets is the reason that the event is known as triple witching.

However, with the addition of some single stock futures contracts, triple witching is sometimes referred to as quadruple witching.

Triple or quadruple witching can cause erratic behaviour in the affected (and some non affected) markets, both during the week preceeding, and on the expiration day. Some traders take no notice of this, some recommend caution, and others recommend not trading at all. Which reaction you choose will depend upon your trading style (scalping, day trading, etc.), your trading system, and primarily your level of trading experience (i.e. new traders will probably be more cautious than experienced traders).

Note that triple witching does not include all of the stock index futures and options contracts, and none of the currency futures and options markets (which already expired on the previous Monday). So, even though the triple witching days are the most talked about expiration days, they are not the only expiration days to be aware of.

The exact expiration dates for each market are available via the futures and options contract specifications for each market.

Also Known As: Quadruple Witching, Freaky Friday

Continue Reading...