Too Many Witches

If you’ve spent some time in the investing world, you have probably heard the terms “triple witching” and “quadruple witching.” But that doesn’t mean you know what they are or why they should concern you as an investor.

A triple witching day is when stock options, stock index options, and stock index futures all expire on the same day. A quadruple witching day is when stock options, stock index options, stock index futures, and single stock futures all expire on the same day.

These days happen on a quarterly basis, and the financial media usually makes a big deal out of it. Why? Because the expiration of these derivatives can, and will, cause increased volatility in the market.

If you are a short-term trader, you certainly need to be aware of witching days. They occur on the third Friday of March, June, September, and December. If you are a long-term investor, triple witching and quadruple witching days will have little impact on you. Just be aware that when they happen, the market may get a little crazy. When you’re prepared for some volatility, you won’t overreact.

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