What is triple witching: a day, a time, a curse? In fact, despite its witchy name, triple witching refers to an important event in the world of stocks and investments that happens four times each year. On the third Friday of March, June, September, and December, the contracts for stock index futures, stock index options, and stock options all expire at the same time: a triple witching. This daylong event, which is sometimes referred to as “Freaky Friday,” is an important day for short-term investors because the markets tend to be turbulent and unpredictable, shifting erratically as traders attempt to offset their orders before the closing bell rings.
So what is triple witching? If you want to be a successful swing trader, you had better know the answer. Scroll down to learn more.
What Is Triple Witching?
What is triple witching? It is a phenomenon that occurs on the third Friday of four months: March, June, September, and December. The day is known as the triple witching day, and the last hour of the trading session (which is 3-4 PM Eastern Time) is known as the triple witching hour. On this day, to reiterate, stock market index futures, stock market index options, and stock options all expire. Because of this, traders are often very active and shares are bought and sold at a heightened rate and volume. The name “triple witching” refers to the folklore belief of the witching hour, the peak hour for dark magic, which compares to the volatility of the market during this peak hour for trading.
Long-term investors don’t need to worry about triple witching, but swing traders should watch out for big changes and swings in the market. The day might inspire great buying or selling pressure or cause a dramatic shift in stock prices. If you carefully watch this volatility, spot opportunities, and make smart choices, you can profit from the turbulence. However, you must also know how to avoid the great risks that arise during triple witching. Finally, consider watching the days before each triple witching, because traders often choose to shift their positions before unpredictable Friday.
The Other Witchings
Since we’re discussing triple witchings, we probably ought to mention that there are two other witchings of which you should be aware: the double witching and the quadruple witching.
A double witching occurs eight times each year on every third Friday of the month (except for March, June, September, and December, of course, when a triple witching occurs). During a double witching, two of the options and futures expire, but not all three.
And finally, a quadruple witching occurs when stock index futures, stock index options, and stock options all expire along with individual stock futures options. This event has only been around since 2001, when single stock futures were introduced.
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