Market Insights

What Is Quad Witching?

Quadruple witching is an event in financial markets when four different sets of futures and options expire on the same day.

Futures and options are derivatives, linked to underlying stock prices. When derivatives expire, traders must close or adjust positions. That can trigger significant volume and order flow. The four types of derivatives expiring on quadruple witching are:

• Stock index futures contracts
• Single-stock options
• Options on stock-index futures
• Stock index options

Note: Some lists include single-stock futures on the list of quad-witching expirations. However these are relatively small products with minimal impact on the market.

When Are 2024’s Quad Witching Days?

Quadruple witching days are the third Fridays of March, June, September and December. That way, they occur near the end of each quarter in the year. In 2024 they’re on:

• March 15
• June 21
• September 20
• December 20

Market Impact of Quadruple Witching

The simultaneous expiration of stock-index futures, options on stock-index futures, single-stock options and index options can generate significant volatility and volume. For example, the December 15, 2023, quad witching day saw the most volume in the S&P 500 in the second half of last year. The other quad witching days also had above-average activity. (See the chart below.)

The folkloric name “witching” comes from the idea of certain times when dark, supernatural forces are active. It can metaphorically apply in markets if traders are forced to unwind large derivative positions. Such events could sometimes cause unexpected moves, although newer rules have reduced much of the previous havoc. For the most part, it now causes heavy volume.

Stock Index Futures

These include heavily traded products like the E-Mini S&P 500 (@ES) and E-Mini Nasdaq-100 (@NQ). The Dow Jones Industrial Average (@YM) and Russell 2000 (@RTY) also have futures.

Futures traders can take long and short positions around the clock from Sunday evening through Friday afternoon. If they want to keep a position through quarterly expiration, they must sell the expiring contract and buy into the newer contract. This so-called “rolling” is a big reason for the heavy volume on quad witching days.

Single Stock Options

Single-stock options track movements in companies like Apple (AAPL) and Tesla (TSLA). Call options give investors the right to buy shares. Put options give the right to sell.

Stock options expire the third Friday of every month, so they’re always active on quadruple-witching days. It’s worth noting that thousands of companies have stock options — unlike the handful of index futures.

Options on Stock Index Futures

Equity index futures like the E-minis mentioned above have options contracts. Call options let traders buy the futures at specific prices, so appreciate when the market rises. Puts let them sell at specific prices, so can profit to the downside.

Options on Stock Indexes

These products have some similarities with options on index futures because they track major benchmarks like the S&P 500 and Russell 2000. However they have other important differences and are mostly used by institutional investors.

Stock index options also have call options and put options. They expire quarterly on the third Friday, so they help drive activity on quadruple witching days.

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement visit www.TradeStation.com/DisclosureFutures.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See www.TradeStation.com/DisclosureOptions.

Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.