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Beware of Today’s Quadruple Witching

Posted On March 20, 2020 1:48 pm
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Today is the quarterly event known as quadruple witching in which 1) S&P 500 futures, 2) options on those futures, 3) options on individual equities and 4) single stock futures all expire.  In the past, these ‘witching’ days have been characterized by above-average trading volume and increased volatility.  But in the current environment, those are relative terms as both have had record levels for the past three weeks.

Still, expect some wild gyrations, especially as we head into the close today which could carry over into Monday’s opening as positions get squared away, hedges established and positions rebalanced. But don’t worry, it’s not as scary as it sounds. While there will likely be higher than normal trading volume, the “witching” days tend to be less volatile than when the term was first coined some 30 years ago, and back then it was merely a ‘triple’ witch.

Some of the reasons for the lower volatility include a staggering of expiration periods, a plethora of new products — such as ETFs — and the addition of weekly, monthly and quarterly option expirations, which have diffused the impact of the quarterly contract rollovers.

First off, we can… Continue reading at StockNews.com for the full article.

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Steve Smith
Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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