Beware Of Stock’s Witching Hour

Accountancy Resources

Beware Of Stock’s Witching Hour

Stocks Author: Admin


Beware of the “quadruple witching hours!”

What sounds like a line from a cheap horror movie is actually a warning you are likely to hear four times a year when four speculative derivatives all expire on the same Friday.

The event happens on the third Friday in March, June, September, and December when options, index options, single stock futures, and index futures all expire on the same date.

The speculative investments are not for beginners and the reason these four Fridays carry a warning is the market can be especially chaotic on these freaky Fridays.

The reason for the chaos is traders in the expiring contracts scramble to close their positions and as they do, their actions may push the market up or down.

Most of this action occurs in the final hour or so of the market and usually adds an extra measure of the volatility of the action.

Some traders may try to profit from this increased volatility, but it’s really difficult to know whether the action will push the market up or down (or up and down).

Long-term investors should sit tight and let the madness pass. The market usually rights itself the following week.

The reason it is important to know these dates is you are better off not planning any buying or selling on these Fridays, especially late in the trading day.

You never know what will happen on “Freaky Friday.”