The word conjures images of spells, brooms, and pointed hats, but the term in finance refers to an event that happens four times a year where stock index futures, stock index options, and individual stock options all expire on the same day. Triple Witching happens on the third Friday of March, June, September, and December. You may hear it be termed Quadruple Witching, the terms are used interchangeably as Triple Witching turned into Quadruple Witching with single stock futures began trading in 2002. In 2020, One Chicago, the exchange that held single stock futures closed down, making it a Triple Witching again.
Futures and options are different from traditional investments in that they have an expiration date. Because the contracts expire, there is increased trading on this day. The additional trading can create unusual price movements in the stock market. The last 5 created excess volatility in the market as noted in the chart below, however, it does not always lead to increased volatility.
For the long term investor triple witching dates are a fun thing to know and be aware of, but not something to base investment decisions.
by Jonathan Lawton CFP®
Managing Partner, OpenAir Advisers LLC.
Advisory services offered by OpenAir Financial, LLC, a registered investment advisor in the state of Texas. Insurance products and services are offered through OpenAir Advisory, LLC, an affiliated company.