What is Quadruple Witching
Volume and volatility usually is higher than average on quadruple witching occurs. Trading could be volatile since Friday is also quadruple witching — a quarterly event when stock index futures, stock index options, single stock futures and stock options all expire simultaneously on Friday. While quadruple witching sounds rather haunting, it actually refers to your finances. What is the result of quadruple witching expiration? According to the Wall Street Journal, quadruple witching appears to be causing a good amount of stock trading.
With increased activity at the end of the year from quadruple witching, many firms might end the year on a good financial note. There are no more major earnings reports or contract expirations during the last couple of weeks of the year so this is their last opportunity to earn.
“Most people have had their year, good and bad, and they’re sitting on their hands.”
Stocks finished lower Thursday, with the Dow losing 133 points, after Greece received another credit downgrade and the dollar surged against the euro to its highest level since September. The greenback was also supported by the Federal Reserve’s announcement the previous day to leave interest rates unchanged near 0%.
Companies like Nike (NIKE) reported its earnings fell to 76 cents in the second fiscal quarter from 80 cents per share a year earlier. Pepsi (PEP, Fortune 500) announced late Thursday that it will not advertise in this season’s Super Bowl. The beverage giant has advertised the past 23 years, and was among the top four advertisers during last season’s game.
Stocks in Asia finished lower, while European indexes were slightly higher in midday trading.
The dollar was mixed against major international currencies; it was lower against the euro and the pound Friday, but higher versus the yen.
Crude oil for January delivery surged $1.60 to $74.25, while gold for February delivery fell 60 cents to $1,106,80.
Bonds were lower, with the benchmark 10-year bond yield rising to 3.50% from 3.48% late Thursday.
The major currencies were helped by S&P futures and by the cash equity market in gaining a few pips during the overnight session. However, compared to the sell-off seen over the last two weeks of trading, this intra-day uptrend is very small. Unless the cash and equity markets continue to stay into the green during the day, another round of USD buyers might join the market during the upcoming U.S. session.
The one thing that may hold fair value on most markets is the expiry of December, quarterly, and yearly U.S. option contracts today.