What is Triple Witching Hour?
On the third Friday of every March, June, September, and December, contracts for stock index futures, stock index options, and stock options all expire at the end of the day. The triple witching hour is the final trading hour on those days.
How Does Triple Witching Hour Work?
During the triple witching hour, many traders move to close and hedge their options and futures orders before expiration. Because of the massive volumes and quick movements in every direction (e.g. calls and puts) on a variety of investment instruments, the market can become volatile and unpredicable in the short term.
Why Does Triple Witching Hour Matter?
The high volumes seen during the triple witching hour can lead to increased volatility, presenting opportunities for some traders. A trader with a variety of short-term securities that could be affected by the triple witching hour must know the risks and strategies to mitigate them. Otherwise, it may be wiser to opt out of the market during triple witching hour events.