10/27/2023
Throughout history, weâve used scary terms to define things we donât understand.
Sometimes, we even use these scary ideas to keep people away.
Youâve probably heard the term âthe Witching Hour.â
Used for that time of night when kids should be home in bed, not out causing mischief. Of course, the stock market couldnât be left out of a nice scary term.
But why not up it a little bit?
They call it the Triple Witching hour.
Have you ever heard that term?
It is the term used to define the final hour of trading on the third Friday of every March, June, September, and December.
Why Triple Witching?
Because three things happen that day and culminate in the final hour.
Stock Options, Stock Index Futures, and Stock Index Option Contracts all expire.
Rather than explain how each of those contracts works here on social media, letâs focus on why it was given a âscaryâ name.
Due to the contracts expiring, many traders need to purchase or sell stock to hedge their positions on their contracts.
This increases the volume and volatility of trading leading up to the triple witching hour.
How much does it increase?
On average, it opens at 10 times higher volume and closes at five times higher volume. That higher volume can mean all kinds of things for prices of stocks in the days leading up to and after a triple witching.
The trading during a triple witching, however, doesnât typically have a long-term effect on prices.
So, unless you are a professional trader dealing with expiring contracts yourself, itâs best to stay away and let the specialists do their thing.
Itâs kind of like the witching hour; donât be afraid to stay up past midnight, but why not get some sleep instead?