Triple Witchcraft refers to the quarterly event in the financial market where stock options, stock index futures, and stock index options expire at the same time.
This event occurs on the third Friday of March, June, September, and December and is sometimes called "Triple Due Day" or "Triple Witching Day."
Triple Witching can cause increased trading volume and market volatility as traders close, roll over, or adjust positions in these derivatives contracts.
The simultaneous expiration of these financial instruments can result in large price movements for the underlying stocks and indexes, especially during the last hour of trading on the triple witching day, sometimes referred to as the "witching hour."
What is triple witchcraft?
The term “triple witchcraft” originated in the 1980s, when these three financial instruments were first observed to mature simultaneously.
Simultaneous expiration is the result of exchanges setting standardized expiration dates for options and futures contracts.
Triple Witchcraft is sometimes called "Triple Due" or "Triple Witch Day."
Why should traders care about Triple Witchcraft?
During a triple witching period, investors and traders may close, roll over, or adjust their positions in stock options, stock index futures, and stock index options.
Increased activity can result in large price movements for underlying stocks and indices, especially during the final hour of triple witching day trading, sometimes referred to as the "witching hour."
As a result, market participants can expect higher trading volumes and market volatility during these periods.
While the impact to long-term investors may be limited, short-term traders and those with positions in options or futures contracts should be aware of the potential risks and opportunities associated with Triple Witchcraft.
How to trade Three Witches
It should be noted that Triple Witchcraft mainly affects the options and futures markets, and its direct impact on individual stocks may be limited.
For long-term investors, the impact of Triple Witchcraft may be minimal, as fluctuations tend to be short-lived and may not have a significant impact on overall market trends.
However, for short-term traders and those with open positions in options or futures contracts, it is critical to understand the potential for increased volatility and rapid price movements.
Some strategies for dealing with triple witchcraft include:
- Monitor Open Positions: Traders should closely monitor open positions in options and futures contracts and consider closing or rolling positions before expiration to avoid unnecessary risk.
- Use Limit Orders: Placing limit orders can help traders control the price at which securities are bought and sold, thereby minimizing the impact of sudden price fluctuations.
- Stay informed: Paying close attention to market news and developments during Triple Witchcraft can help traders identify potential opportunities and risks.