Double Witching

You must've heard of the “witching hour,” the time of night when black magic and supernatural events happen to unsuspecting teens with six-packs and tight clothing.

So, um, how appropriate to connect it with Wall Street? Normally, stock options in America expire on the third Friday of every month—that’s the reason the options sheet just shows, for example, KO $455 strike 50 Nov. 19. But it’s not November 19th that they expire—it’s the third Friday of November in 2019—the system just simplifies, well, everything. But double witching adds another layer.

On the third Friday of every March, June, September, and December, (called the double witching days) two out of four classes of options or futures expire. These four classes are: stock index futures, stock index options, stock options, and single stock futures. To further challenge the situation, there are also single, triple, and quadruple witching hours, where frantic traders try to close out their positions in one, three, or all four classes, respectively, during the last hour of the stock market trading session (3:00-4:00 P.M. Eastern Standard Time) on these days.

No wonder traders are always shouting like it’s a matter of life or death on TV and in the movies.