Market Overview

What Does Quad Witching Mean? (SPX)


You should be hearing a lot of people talking about Quadruple Witching today because it is usually a pretty big deal. But what does it mean exactly?

Simply put, Quadruple Witching is the day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire. This day is similar the triple witching hour, except that the quadruple witching hour also includes the expiration of SSFs as well.

Note that quadruple witching days only occur on the third Friday of March, June, September and December, meaning once every quarter.

This day is important because volumes usually explode on these days as market makers, large institutions, hedge funds, and other traders hedge their positions in the four above products against the underlying indexes. This can and often does produce wild, volatile swings in stocks, indexes, etc that do not correlate to a fundamental move in such underlyings.

On these days it is always prudent to have a game plan, watch stop loss levels closely, and, perhaps most importantly, pounce on any major opportunities that may arise from mechanical movements in the market and not fundamental movements.

Today has been relative quiet considering Quad Witching is occurring; currently the S&P 500 (CBOE: SPX) is higher by 0.75 points, trading at $1,125.

Posted-In: Options


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