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What is triple witching?

What is triple witching?

Triple witching hour is when three types of derivatives expire at once, which happens once every quarter in the US. It typically results in irregular or volatile movements in the markets.

When stock market index futures, stock market index options and stock options all expire at the same time, the hour before close is called the Triple Witching Hour. This occurs on the third Friday of March, June, September, and December in the United States between 3:00 PM and 4:00 PM Eastern time.

Increased trading volume in these derivatives, as well as their underlying and related securities, causes uncertainty, volatility, and surprise to characterize a Triple Witching. The term comes from folklore, in reference to the time at night, in certain seasons or phases of the moon, when witches were said to be active, casting spells and causing surprising effects to be reported by local townspeople.

The unpredictability of these hours in the market and the devilish deeds it could do to trader's positions brought about the name. It serves as a warning to for traders to remember that they might want to close out positions before the witching hour begins.

It also reminds us of the superstitions and emotional influences that some traders and investors sometimes bring to the market.

Keywords: superstition, derivatives, Futures, expiration date, witching hour, options,