Defining quadruple witching in the stock market
Today is quadruple witching day, which occurs on the third Friday of March, June, September, and December each year. Unfamiliar with the term? Quadruple witching is:
“A day on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.” 1
I already know your next question: what’s the difference between an option and a future? Got ya covered there too:
“The primary difference lies in the obligation placed on the contract buyers and sellers.
In a futures contract, both participants in the contract are obliged to buy (or sell) the underlying asset at the specified price on settlement day. As a result, both buyers and sellers of futures contracts face the same amount of risk.
On the other hand, the option contract buyer has the right but not the obligation to buy (or sell) the underlying asset. Hence the term “option” and this option comes at a price in the form of a premium (more specifically, the time value of the premium). With this “option”, the option buyer’s risk is limited to the premium paid but his potential profit is unlimited.”2
Bonus note: it used to be called “triple witching” until single stock futures were introduced into the mix in 2002.3
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