Quadruple Witching Day
The day (each quarter) when four kinds of derivatives — index futures and options and the like — all expire at once. Volume explodes and volatility rises.
In plain terms
Quadruple witching is the day four kinds of derivatives (index futures, index options, single-stock futures, single-stock options) all expire at once. It comes four times a year, each quarter. The name is from the eerie image of four witches appearing at once.
Ahead of expiry, investors clearing and rolling positions makes trading explode, and the price tends to swing more than usual especially near the close.
What it tells you
Quadruple witching shows that "a price can be swayed by derivatives supply-demand, not company value." It is the day the earlier "tail wagging the dog" phenomenon concentrates.
So spikes and plunges that day are often temporary supply-demand from expiry, not something happening at the companies.
Formula
quadruple witching = index futures, index options, single-stock futures, and single-stock options all expire on the same day (the third Friday of March, June, September, December)
What high or low means
Volatility and volume tend to rise before and after expiry, especially near the close. But the direction (up or down) is not set.
That day's swings are usually temporary, often returning to the underlying flow the next trading day.
Do not mistake quadruple-witching spikes and plunges for "the market's real direction." It is only temporary supply-demand from derivatives expiry, not a change in fundamentals.
Betting on that day's swings with day trades is very hard and risky. Even experts struggle to predict expiry-day flow.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Quadruple and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.