Its a triple witching day, volume will come at the close WHAT IS...

Its a triple witching day, volume will come at the close

WHAT IS TRIPLE WITCHING?

In the context of financial markets, "triple witching" refers to a specific event that occurs on the third Friday of certain months, typically March, June, September, and December.

During triple witching events, three different types of financial derivatives contracts—stock options, stock index futures, and stock index options—all expire on the same day. This convergence of multiple expirations can lead to increased trading activity and volatility in the financial markets.

As a result of increased market volatility, triple witching events can sometimes create opportunities for vigilant investors and traders. But due to heightened volatility, triple witching events are also arguably riskier than other expirations. As such, market participants should be aware of triple witching to ensure they are prepared for possible high-magnitude moves, and manage their portfolios accordingly.

HOW DOES TRIPLE WITCHING WORK?

During triple witching, three different types of financial derivatives contracts—stock options, stock index futures, and stock index options—all expire on the same day. This convergence of multiple expirations can lead to increased trading activity and volatility in the markets.

More details on triple witching are outlined below:

Stock Options: On triple witching, regular monthly stock options contracts that are listed on individual stocks or exchange-traded funds (ETFs) typically expire. Traders and investors who hold these options positions must decide whether to exercise them, roll them over, or let them expire.

Stock Index Options: In addition to regular stock options, stock index options contracts, which are options based on broader market indices like the S&P 500, also typically expire on triple witching. That means investors and traders holding these positions must also decide whether to close or roll their positions on triple witching.

Stock Index Futures: Stock index futures contracts, such as those based on popular indices like the S&P 500 or Nasdaq, also expire on triple witching. These futures contracts are often used for hedging and speculative purposes, which means many market participants close or roll these positions on (or before) triple witching.