Quadruple Witching

  

Categories: Derivatives

Going through a haunted house in Salem, Massachusetts, on Friday the 13th during a full moon. Quadruple witching.

Also, it's a term used to describe multiple expirations in the financial markets.

Derivative contracts have expirations. We're talking about options and futures here. These expiration dates are pre-set. Every quarter (every three months), the expirations of stock options, stock futures, stock index futures, and stock index options all take place on the same date. It happens on the third Friday of March, June, September, and December (each representing the last month of a particular calendar quarter).

These expirations can cause volatility in the underlying markets. Squaring the derivative positions involves buying and selling the underlying assets (in this case, individual stocks and stock indexes). All that action can make things wonky when quadruple witching happens.

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