- U.S. stocks face a volatility test on Friday with the expiration of $4.5 trillion in options contracts during a quarterly “triple-witching” event, which may see subdued impact due to lower open interest and neutral dealer positioning, per Citigroup (C) estimates.
- The S&P 500’s (^GSPC) 1.1% rise on Wednesday, spurred by Fed Chair Jerome Powell’s steady policy stance, follows a correction driven by trade policy concerns, setting a calmer backdrop as traders and dealers prepare for heightened volumes, with activity possibly peaking on Thursday, per IUR Capital’s Gareth Ryan.
- While many contracts are set to expire worthless, reducing hedging needs, the event precedes the JPMorgan Hedged Equity Fund’s S&P 500 put options at 5,565 expiring later this month, adding another layer of market influence.
Triple witching: An explanation
“Triple Witching,” happens on the third Friday of March, June, September, and December.
It’s an event when index futures, index options, and stock options contracts all expire at once.
Once called Quadruple Witching with the inclusion of single-stock options expiration, the term has been removed after their discontinuation in 2020.
The event usually plays out during the last hour of trading when contracts expire.