"Quadruple Witching" is the day four major contracts, which include stock index futures, stock index options, stock options and single stock futures, expire. The trading on these days is typically volatile, especially during the "Quadruple Witching Hour", which is the hour before the markets close (3 p.m. to 4 p.m. ET). Quadruple witching happens on the third Friday of March, June, September, and December.
The reason that a quadruple witching day may have volatile trading conditions is that many investors want to unwind their interests in futures and options contracts prior to the contract expiration date. Stock trading increases as investors replace or repurchase existing contracts.http://web.streetauthority.com/terms/q/quadruple-witching.asp
A Triple Witching is an older version of the same occurrence, but without the inclusion of single stock futures expiring.
Quadruple Witching Investing Considerations
Active traders usually want to unwind and repurchase contracts before they expire. The effect of having 4 major types of contract expiring on the same day leads to increased activity on the quadruple witching days. The markets on these days are characterized by increased trading volume, as well as increased volatility.http://web.streetauthority.com/terms/q/quadruple-witching.asp This creates both risks and opportunities for investors.
Triple Witching Hour
In the 1980's, contracts for stock index futures, stock index options, and stock options all expired at the same time on the morning of the third Friday of the quarter. Brokers began calling this the "triple witching hour" because of the "scary" nature of the market volatility cause by the increased trading volume. The contract expiration of options was moved to the afternoon, spreading out the trades, and leading to the whole day to be considered a "Triple Witching Day". When single stock futures were introduced, adding a fourth contract into the mix, Triple Witching became Quadruple Witching.http://www.investorwords.com/6894/quadruple_witching_hour.html
Remaining Quadruple Witching Dates for 2010
References
Fast Facts
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Fact:
Quadruple Witching days occur on the third Friday of March, June, September and December.
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Fact:
The last hour of these trading days, from 3PM to 4PM EST, is referred to as the "quadruple witching hour."
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Fact:
The term "triple witching hour" originated in 1980s
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NYSE Volume December 18, 2009
6,325,890,000
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Next Date of Quadruple Witching
June 18, 2010
