What is a “triple-witching” day?
Though the phrase is thought to have originated with the witches in Shakespeare’s Macbeth, a triple witching day has nothing to do with spells or cauldrons and everything to do with stocks and closing bells. It is a financial term, referring to the last day of the quarter when contracts for stock options, index options and future options all expire at the same time. Triple witching days take place on the third Friday of every third month, in March, June, September and December. During a triple witching day, investors and traders have to decide whether to sell their options or roll them over to the next quarter. If they haven’t taken action before the end of “expiration Friday,” the stock will typically become worthless. As a result, the volume of stocks traded on these days increases dramatically. With so many options being bought and sold and rolled over so quickly, the value of these options often fluctuates. In fact the value of stock options may rise or fall for days before expirat
The term triple or quadruple witching day, in Wall Street lingo, means a Friday on which many types of options expire. Specifically, the triple represents the stock index futures, stock index options, and stock options. The quadruple adds the single stock futures. The reason witching days are carefully monitored is that they skew the volume numbers by creating many trades that have nothing to do with the market fundamentals but rather with the mechanics of options trading. Large volume spikes on such days are typically discounted as irrelevant. Warm wishes and until next week.
Four times a year — on the third Friday of every third month just before the quarter comes to an end — you will hear comments in the media about triple-witching day. On these days, expiration for options, index options, and options on futures contracts all occur simultaneously. Usually, this results in some wild price swings.
