• Quadruple witching occurs on the third Friday of March, June, September, and December, affecting major derivatives contracts.
• The event typically results in increased trading volumes and volatility, with significant price movements observed during these periods.
• Effective strategies during quadruple witching include trend trading, mean reversion, scalping, and news trading to take advantage of the heightened market activity.

The popularity of investments in the financial markets is growing day by day. As more and more investors enter the market every year as investors and traders, several special events often make the news. One such special occurrence in the stock market is quadruple witching. If you are interested in learning what quadruple witching is, know in detail what it is through this article.

We will begin this article by discussing what quadruple witching is, knowing in detail when it occurs, strategies for trading during this phase, and some historical instances that have left a mark on the global markets.

Quadruple witching is an interesting term. It is used in association with four entities: stock options, stock index futures, single stock futures, and stock index options. Simply put, quadruple witching is a specific date on which the above-mentioned derivatives instruments expire simultaneously.

When discussing market volatility, it is crucial to explore what is quadruple witching and know in detail how it affects trading strategies. But first, let us see when this event occurs.

Quadruple witching happens on the third Friday of March, June, September, and December each year, when the four major types of derivatives—single stock futures, stock index futures, stock index options, and stock options—expire simultaneously. This event is most significant in the U.S. and European markets, as these instruments have substantial trading volumes in these markets. However, it also leads to heightened market volatility.

In India, derivatives like stock and index futures also have expiration dates, but the specific occurrence of quadruple witching is less emphasised. Indian markets typically settle monthly contracts on the last Thursday of the month, which is similar to a quadruple witching day. If this Thursday falls on a holiday, the expiry shifts to the previous Wednesday.

Key dates for quadruple witching:

• 2024: March 15, June 21, September 20, December 20
• 2025: March 21, June 20, September 19, December 19
• 2026: March 20, June 19, September 18, December 18

When discussing market volatility, it is crucial to explore what is quadruple witching. Know in detail how it affects trading strategies and which strategies can help you trade profitably.

As single stock futures, stock index futures, stock index options, and stock options expire at the same time, ‘quadruple witching hour’ can generate significant volatility and volume. The ‘witching’ part of its name comes from the notion that, during certain periods, supernatural forces remain active. This metaphorically applies to markets when traders close large derivative positions. This can, at times, trigger unexpected movements. However, it now mostly results in heavy trading volume.

Now that you know what quadruple witching is, know more in detail about the specific strategies that can help you profit despite the volatility. Generally, this period provides aggressive trading options, depending on unique preferences, risk tolerance, and trading styles of traders. Here are some strategies that you can explore:

• Scalping
  The scalping strategy is about making a lot of trades in a short time with the objective of profiting from small price changes. Quadruple witching boosts trading volume and volatility in the market, which increases opportunities for scalp traders to make profits.
• News trading
  This strategy revolves around capitalising on the price movements induced by news updates. As quadruple witching increases market volatility, the latest news updates can often heighten market reaction and increase opportunities for traders who follow this strategy.
• Trend trading
  Similar to news trading, the trend trading strategy involves monitoring market trends and trading according to the current market direction.
• Mean reversion
  The mean reversion strategy relies on the idea that prices will return to their average. During quadruple witching, sharp price swings can create large deviations, giving these traders a chance to profit as prices revert to their typical mean levels.

For those curious about what quadruple witching is, know in detail the past instances where quadruple witching has historically triggered notable market activity. Below are key examples that illustrate the impact of these events on trading volumes and market behaviour.

• 2023 : On all the quadruple witching days this year, the S&P 500 experienced significant selloffs and sharp increases in trading volume, leading to significant changes to investor portfolios.
• September 18, 2020 : Trading volume surged as 14 billion shares were exchanged, representing a 40% increase over the three-month average, highlighting the intense market activity associated with quadruple witching.
• March 15, 2019 : U.S. exchanges saw a 25% spike in trading volume on the first quadruple witching day of the year, with $10 billion traded, underscoring the heightened market dynamics during these periods.

Conclusion

Quadruple witching is a notable event in the financial markets that can significantly impact trading activity and market volatility. It involves the simultaneous expiration of single stock futures, stock options, stock index options, and stock index futures. While its effects are most pronounced in Western markets, Indian markets also experience heightened activity on similar dates. Understanding what quadruple witching is, knowing in detail the associated trading strategies, and how to profit in this period can help investors navigate the volatility more effectively.

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