Talk:Triple witching hour
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History?
editWhat is the background behind having all of such contracts expire at the same time? What is the history behind it? It seems somewhat arbitrary, so there must be a tradition or market standard? Thx. --Furrypop 09:17, 15 June 2007 (UTC)
"Freaky Friday"
editThe article had a reference to this. On Talk:Freaky Friday (stock markets), the consensus was that this term in not used to reference to the Triple witching hour. Please have a relevant citation if you want to add it back. patsw 01:40, 3 October 2007 (UTC)
Since there's no "triple witching day" entry, why not change the title of this page to "triple witching day" and mention in the article that the TW hour is the last hour of that day? This article seems to be detailed enough. (unsigned)
- It is my impression that "Triple witching hour" is the more common term. In any case, there once was a "triple witching day" article, but it was a cut-and-paste from an investment glossary so it got deleted as copyright violation. I created a redirect to here, since apparently at least some folks refer to it as a day rather than an hour. --Jaysweet 13:10, 1 November 2007 (UTC)
- I've seen "hour" always and everywhere, "day" never and nowhere. But a redirect at "triple witching day" is worth it. Some sources define it as the day when triple wishing hour occurs. Emphasizing, quite rightly, the hour when the volatility occurs. "Day" has about half the hits of "hour." —Preceding unsigned comment added by 64.105.0.217 (talk) 18:32, 15 August 2009 (UTC)
"Macbeth" as origin
editThe suggested origin of this from "Macbeth" needs a citation. The obvious reason for triple is that three classes of securities expire -- one doesn't need to drag in Shakespeare to explain its origin. That makes it dubious to me. The text will be deleted if a citation is not provided. patsw (talk) 13:44, 21 December 2007 (UTC)
- Unsourced MacBeth reference deleted from article, August 2009. —Preceding unsigned comment added by 64.105.0.217 (talk) 19:05, 15 August 2009 (UTC)
Nice explanation of volatility -- & why it's often less today
editQ: What does the term "triple witching hour" mean? ... In the early 1980's when organized futures and options exchanges began trading standardized contracts based on stock indices, that final value of those indices for cash-settlement purposes was usually the close of trading on the third Friday of the month. Every month there is an expiration on options and options on the futures. But expiration of the futures, where a large proportion of the arbitrage activity takes place, only occurs once a quarter. So on the third Friday of the last month of each quarter, stock exchanges would be deluged with orders to buy or sell huge quantities of stock at exactly the closing price used for cash-settling the derivatives contracts. This combined expiration of options, futures and options on futures came to be known as the Triple Witching Hour.
Because these arbitrage strategies were market-neutral, simply taking advantage of price discrepancies between the index and derivatives on the index, they didn't represent any real opinion on the market's direction. But unwinding only one side of the strategy with a market order and letting the other side cash-settle sometimes caused huge gyrations in the markets during the final hour of trading on the third Friday of that month.
Eventually, many of these expiring contracts switched from using Friday's closing price to using the opening price or trading range for each of the component stocks in determining their settlement values. This lessened the pressure for immediate execution at any price, and allowed the possibility of delayed openings for order imbalances at exchanges that have such procedures in place. So while the triple expiration of options, futures and options on futures can still have an impact on how the market opens on that day, the kinds of gyrations that routinely occurred in those early days is rarely observed today.
—Preceding unsigned comment added by 66.167.95.138 (talk) 20:45, 14 August 2009 (UTC)
Triple & Quadruple witching hour explained & distinguished
editBrokers generally understand these terms to refer to extra volatility in the final hour of the third Friday of the month (or the last hour of the last trading day before the third Friday if the third Friday is a holiday). Volatility may be even higher on the third Friday of the quarter where additional futures contracts (SSFs) expire. These terms are imprecise, in that "witching hour," "triple witching" hour and "quadruple witching hour are used informally and almost interchangeably for third Friday volatility.
... “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. http://stocks.about.com/od/advancedtrading/a/0911triplewitch.htm
quadruple witching hour
Definition
The final hour of the stock market trading session on the third Friday of March, June, September, and December, when in addition to the expiration of option contracts and futures contracts, which indicates a triple witching hour, the expiration of single stock futures (SSFs) also occurs. http://www.investorwords.com/6894/quadruple_witching_hour.html
No MacBeth. —Preceding unsigned comment added by 64.105.0.217 (talk) 18:22, 15 August 2009 (UTC)
Do Single Stock Futures still expire only quarterly? Or is it every month?
editI see options on single stocks available that expire in every month, not just in the last month of each quarter. Does a "Quadruple Witching Hour" now occur every month, but is called a "Triple Witching Hour" by tradition? Does the last hour matter less than it did because it is now the price at the open on that third Friday (or the last trading day before if the third Friday is a trading holiday that sets the price for closing the options that expire that Saturday (or on Friday, if Friday is a trading holiday)?
Perhaps an expert is needed to sort this through? —Preceding unsigned comment added by 64.105.0.217 (talk) 23:29, 15 August 2009 (UTC)
Here's one expert on the state of the words as of 1985 (pre-Quad witching):
24 June 1985, New York (NY) Times, “Futures/Options” by H. J. Maidenberg, pg. D5:
Expirations Stir a Frenzy
(...)
Another expert ... said:
“On the third Friday of eight months of the year, we have a double witching hour, when just the corresponding stock and index options expire. But it gets really scary on the third Fridays of June, September, December and March, when the index futures also expire and we have a triple witching hour. Still, not all witching hours are alike or produce the same amount of fireworks.”
excerpted from http://www.barrypopik.com/index.php/new_york_city/entry/triple_witching_hour_quadruple_witching_hour/
and here's an expert explanation of the inauguration of Quad witching
Rebecca Byrne
TheStreet.com
12/20/02 - 06:04 PM EST
Friday Marks First ‘Quadruple Witching’ Day
You may not like it, but “quadruple witching” is destined to become a part of stock-market parlance.
Everyone has heard of “triple witching,” of course. That’s the expiration of options on stocks, stock indexes and index futures. But on Friday, single stock futures contracts, which were launched just last month, also expired.
excerpted from http://www.barrypopik.com/index.php/new_york_city/entry/triple_witching_hour_quadruple_witching_hour/ —Preceding unsigned comment added by 64.105.0.80 (talk) 04:15, 16 August 2009 (UTC)
Suggested clearer and notably more accurate explanation of "triple witching"
editUntil single stock options were added, the triple witching hour was the third Friday of March, June, September and December, when options, index futures, and options on index futures expired concurrently.
Now, single stock futures have been added, and they expire at the end of the third Friday of every month, in addition to the other options above. Thus 8 months are now technically "triple witching" and 4 months have third Fridays whose final hour is technically "quadruple witching." But the term "triple witching" has a well-understood meaning, and has continued to be used to refer to the four technically "triple witching" Fridays' final hour.
In the triple witching hour, massive trades in options and underlying stocks by hedge strategists and arbitrageurs can cause above average volume and added market volatility, especially when one side of a position is resolved by cash and the other by trading the securities underlying the option. However volatility has been reduced somewhat by pricing certain instruments other than at the close. —Preceding unsigned comment added by 68.165.11.105 (talk) 17:16, 17 August 2009 (UTC)
Unsatisfactory explanations, industry veteran clarifies
editTriple witching was at one point an "hour", but has not been an "hour" in many years. ...nor did triple witching ever refer to only stock index products. Stock options listed on an exchange for the first time in 1973 on the Chicago Board Options Exchange (CBOE). Years later, in 1982, the Chicago Mercantile Exchange (CME) launched the S&P 500 futures product (SPU), and in 1983, the CBOE launched options on the S&P 100 index (OEX). That same year, CME also launched options on the SPU future. Eventually, in about 1985, the CBOE launched S&P 500 index options (SPX) to compete with the CME's S&P 500 product.
In the early days, all three classes of products expired in the afternoon. The future only expired once every three months, while the options expired monthly, each on the third Friday of the month. So the third Friday on the month when futures also expired was particularly volatile and busy heading into the 4 pm (EST) expiration. Hence traders coined the term "triple witching hour".
Many years ago (in the late 1980s or early 1990s), the exchanges moved to have the S&P 500 index futures and options expire on the opening prints of the constituent stocks at 9:30 am (EST) to reduce the exposure of market participants to increased volatility on the Friday close. From this time on, triple witching only referred to the DAY stock index products and stock options expired. — Preceding unsigned comment added by 64.20.169.138 (talk) 18:24, 7 September 2015 (UTC)