Quadruple Witching: How It Can Affect the Stock Market

Quadruple witching might sound mystical, but it's a significant event in the financial world. Occurring quarterly on the third Friday of March, June, September, and December, this day marks the simultaneous expiration of four types of derivatives: stock options, stock index options, stock index futures, and single stock futures.

Historically, this simultaneous expiration has often led to increased trading activity and heightened market volatility, requiring careful attention from investors. Now, because single stock futures have stopped trading in the US (as of 2022), quadruple witching has given way to triple witching. But more on that later!

What is quadruple witching?

Quadruple witching is a stock market phenomenon that takes place four times a year, caused by the expiry of four different deriviatives.

Quadruple witching takes place on the third Friday of the following months:

• March

• June

• September

• December

It involves four types of derivatives:

• Stock options

• Stock index options

• Stock index futures

• Single stock futures

The term "witching" underscores the potentially chaotic and turbulent market behavior that can often arise on these dates. Investors and traders should try to stay alert during these events, as they can present both considerable opportunities and substantial risks. One key aspect of this turbulence is Implied Volatility (IV), which can significantly impact option prices. Many Option traders have seen a stock price rise, only for their call option to lose value—a frustrating outcome often caused by "volatility crush" after buying at peak IV. To avoid 'overpaying', it's important to know if an option's current IV is high or low compared to its history. Moomoo’s Volatility Analysis feature provides this context with IV Rank, an intuitive benchmark. An IV Rank below 20 suggests options are relatively cheap, signaling a potential buying opportunity, while a rank above 80 indicates prices are high and may not be ideal for buyers. This tool helps you see past the surface price to better understand the true cost of volatility. Register for a free moomoo account to use our Volatility Analysis tools and help ensure every trade is well-informed.

How quadruple witching works

Quadruple expiration dates are the last opportunity for investors to exercise their options, confirm their futures, or extend their contracts for these four types of financial products. This is why quadruple witching can drive a spike in trading volume as market participants close out or roll over positions to manage these expiring contracts. Portfolio managers often rebalance their holdings to align with benchmark indexes like the S&P 500, adding to the day’s trading activity.

These days, the digitization of trading has meant that investors can close out, extend, or confirm their orders any time in the lead up to this event, minimizing some of this volatility. However, it can be helpful for investors to understand the mechanics of quadruple witching to better anticipate and navigate the intense market dynamics typical of these days.

Quadruple witching dates 2024, 2025, and 2026

2025

• March 21

• June 20

• September 19

• December 19

2026

• March 20

• June 19

• September 18

• December 18

2027

• March 19

• June 18

• Sept. 17

• Dec. 17

Quadruple witching example

An example of quadruple witching can be observed on a typical third Friday in one of the designated months, such as September 20, 2024. On this day, four types of derivative contracts expire simultaneously: stock options, stock index options, stock index futures, and single stock futures, the latter of which is not available in the US.

For instance, traders holding options on individual stocks must decide whether to exercise, close, or roll over their positions. Similarly, futures contracts linked to major indices like the S&P 500 or Nasdaq face expiration, requiring decisions on rolling over or closing positions. Additionally, single stock futures expire, compelling traders to manage these positions. To make these decisions effectively, Option traders need to quickly analyze different contracts. However, many platforms display options chains as complex spreadsheets, making it difficult to compare strikes and visualize how profit or loss might change. The moomoo options chain simplifies this with a clear layout and a one-click potential profit-and-loss analysis for any single contract. This lets you instantly see possible outcomes under different price scenarios and filter contracts by expiration or strategy. For example, you can quickly compare calls and puts for a stock, review their potential gains or losses if the stock moves, and select a contract that aligns with your risk tolerance. Open the moomoo options chain to turn complex data into a clearer options plan.

The convergence of these expirations often leads to heightened trading activity and volatility as market participants rebalance or hedge their portfolios. This synchronized expiration can result in significant price swings and trading volume as traders and investors react to the expiring contracts.

Potential benefits and risks of quadruple witching

Key considerations for quadruple witching

Key considerations during quadruple witching include managing increased volatility and trading volume, which can present both potential opportunities and risks for traders. It's crucial to plan for the possibility of erratic price movements that may trigger stop-loss orders unexpectedly. Portfolio adjustments and hedging strategies should be carefully executed to help manage risks associated with rapid market swings.

Additionally, staying informed about quarterly index rebalancing activities can inform trading decisions, particularly for funds and investors tracking benchmark indexes. Overall, maintaining vigilance, managing liquidity effectively, and being prepared for heightened market activity are essential during these high-impact trading days.

Trading quadruple witching

Trading on or around quadruple witching days can involve employing specific strategies such as the below:

• Volatility based strategies: Seek to capitalize on price swings by trading volatility products like options straddles or strangles.

• Arbitrage opportunities: Try to exploit price discrepancies between related instruments such as index futures and their underlying stocks.

• Event-driven trading: Anticipate and trade around scheduled events like index rebalancing, which can drive significant price movements.

• Sector rotation: Focus on sectors affected by index changes or rebalancing to potentially capitalize on sector-specific trends.

• Technical analysis: Utilize technical indicators to identify possible entry and exit points amidst the increased trading volume.

• Hedging: Use options and futures to help hedge existing positions against potential adverse market movements.

These strategies require thorough research, risk management, and adaptability to position yourself to identify and act on potential opportunities while at the same time striving to mitigate the effects of any adverse movement during quadruple witching days.

Quadruple witching vs. triple witching

Quadruple witching and triple witching both involve the expiration of derivative contracts but differ in scope and impact. Quadruple witching includes the simultaneous expiration of four types of contracts — stock index futures, stock index options, stock options, and single stock futures (outside the U.S.), while triple witching involves the expiration of three types of contracts — stock index futures, stock index options, and stock options — resulting in less intense but still notable market activity.

The shift from quadruple to triple witching in the U.S. is due to the decline in the use of single stock futures, following the 2020 closure of the last remaining US exchange offering sindle stock future, OneChicago. Despite this change, both events prompt investors and traders to adjust positions strategically to navigate potential opportunities and risks.

Whatever your strategy, a crucial first step is understanding your trade’s potential profitability. Many investors assume a call option will be profitable as long as the stock price rises, but forget that the premium paid can erode gains if the break-even point isn't reached. Moomoo’s Options Analysis feature clarifies this by instantly calculating the break-even point, theoretical maximum potential loss, and theoretical maximum potential profit for any strategy. This analysis shows you where you can start making money, allowing you to assess the risk-reward ratio before you trade. Register today for a free moomoo account to use our Options Analysis features and trade with a clearer understanding of your bottom line.

FAQ about quadruple witching date

What happens on quadruple witching day?

On quadruple witching day, four types of derivative contracts — stock index futures, stock index options, stock options, and single stock futures (outside the U.S.) — expire simultaneously. This convergence typically leads to heightened trading volume, increased market volatility, and strategic adjustments by investors and traders. The day is often marked by intense market activity as participants close out, roll over, or initiate new positions across these various instruments.

Is quadruple witching bullish or bearish?

Quadruple witching doesn't inherently favor bullish or bearish sentiment. It amplifies market volatility and trading volume, which can lead to both bullish and bearish price movements depending on prevailing market conditions, investor sentiment, and economic factors. Traders often strategize to attempt to capitalize on short-term opportunities presented by heightened volatility, while long-term investors may adjust their portfolios cautiously in response to the increased market activity.

How long does quad witching last?

Quadruple witching typically lasts for the duration of the trading day on the third Friday of March, June, September, and December. During this time, the expiration and settlement of four types of derivative contracts — stock index futures, stock index options, stock options, and single stock futures (outside the U.S.) — drive increased trading volume and market volatility. The effects can be felt throughout the day as investors and traders adjust their positions accordingly.