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π₯ Devils in the marketplace or Quadruple Witching
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The stock market is facing another stress β the first " Quadruple Witching" of the year. Tomorrow futures on stock indices, options on stock indices, options on shares and futures on one share will simultaneously reach the expiration date. We expect an increase in trading volume and unusual price behavior in the underlying assets.
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Also on this day comes Triple Witching Hour, which is the name given to the last hour of trading on the exchange. In fact, contracts for four instruments expire at once during this period, but stock futures appeared on the American market only in 2002, when the idioms " Quadruple Witching " and "Triple Witching Hour" were already actively used.
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This "magic" day happens on the third Friday of March, June, September and December. When quarterly futures and options contracts mature, sudden price swings occur as traders often use the underlying assets to hedge their positions. As a result, players can create a ripple effect in the stock market. For example, the peak trading volume for the S&P 500 came during the Quadruple Witching on December 15, 2023.
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Tomorrow, traders and investors must decide what to do with the current contract β close out, execute, or carry their positions in futures or options to the next period. For example, if you have an S&P 500 Index futures contract with an expiration in September and you want to roll it over, you need to sell the current contract and buy a futures contract with an expiration in December. These decisions always lead to non-standard volatility.
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While the big players will adapt to the new contracts, there are good moments for arbitrage deals between different types of markets. But unless you have free capital and a successful track record of quick stock derivatives manipulation, it's much safer to spend tomorrow out of the market. Although it is always interesting to watch the magical hustle and bustle of financial devils.
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Profits to yβall!