Quadruple Witching

Quadruple Witching: What It Is and How It Affects Markets

Key takeaways

• Quadruple witching refers to the simultaneous expiration of four derivative contract types—stock index futures, stock index options, stock options, and single-stock futures—on the third Friday of March, June, September, and December.
• Since single-stock futures no longer trade in the U.S., these days are often called “triple witching” in practice.
• Quadruple/triple witching days typically see higher trading volume, especially in the final hour, as traders close, roll, or rebalance positions. Increased volume does not always mean higher volatility.
• Common market effects include exercise of in‑the‑money options, hedging activity by market makers, strike‑pinning from gamma hedging, and occasional short‑lived arbitrage opportunities.

What is quadruple witching?

Quadruple witching is the name given to the last hour of trading on the third Friday of March, June, September, and December when multiple derivative contracts expire at the same time. The clustered expirations encourage a wave of trading as investors and market makers adjust positions, close expiring contracts, or roll exposure forward.

Key dates (examples)

Quadruple witching occurs on the third Friday of March, June, September, and December. Example upcoming dates:
* 2025: March 21, June 20, Sept. 19, Dec. 19
* 2026: March 20, June 19, Sept. 18, Dec. 18

How the mechanics work

• Expiration overlap: Monthly expirations for stock options coincide with quarterly expirations for index options and index futures, producing concentrated activity.
• Portfolio rebalancing: Index reconstitutions and fund rebalances that settle on the same day can add to trading volume.
• Typical trader actions: Close or offset expiring positions, roll contracts to later expirations, or exercise in‑the‑money options.

The four derivatives (brief)

• Stock options — Give the holder the right (but not the obligation) to buy or sell shares at a strike price. Monthly options often expire on the third Friday.
• Index options — Derive value from an equity index and are typically cash‑settled; many are European‑style (exercisable only at expiration).
• Index futures — Standardized contracts to buy or sell an index exposure at a future date; usually cash‑settled at expiration and commonly used for hedging.
• Single‑stock futures — Futures on individual stocks. They historically formed part of the quadruple set but no longer trade in the U.S., so the event is often effectively triple witching.

Market effects to watch

• Volume spike: Expiry drives higher volume as in‑the‑money options are exercised and hedges are adjusted.
• Volatility: Activity increases but does not always translate into sustained volatility—price moves can be short‑lived.
• Pinning: Prices may gravitate toward strike prices with large open interest as market makers delta‑ and gamma‑hedge, creating “pin risk” for option holders.
• Temporary distortions: Large block trades and rapid arbitrage can create brief mispricings.

Managing contracts around expiration

• Offset: Traders commonly close positions by taking an opposite trade before expiration to avoid assignment or delivery.
• Cash settlement: Many index derivatives settle in cash, removing the need to deliver underlying securities.
• Rolling: To maintain exposure, traders roll positions by closing an expiring contract and opening a similar one with a later expiration.
• Example: An E‑mini S&P 500 futures contract represents a multiple of the index value; leaving it open at expiry can result in a large cash settlement based on index level.

Arbitrage opportunities

Expirations can create transient price discrepancies that arbitrageurs exploit. Benefits include potential quick profits and increased liquidity; risks include rapid reversals and amplified losses when many participants chase the same distortions.

Brief case example

On a recent quadruple witching day (March 15, 2019), U.S. trading volume rose notably, illustrating the surge of activity that typically precedes and accompanies these expirations. Isolating the exact market impact of the expirations from other concurrent events (earnings, macro news) is often difficult.

What investors should know

• Expect higher volume in the final hour and possible short‑term price moves.
• If you hold options or futures through expiration, be prepared for assignment, delivery, or cash settlement.
• Consider rolling or offsetting positions ahead of expiry to avoid unintended outcomes.
• Be cautious of pin risk and temporary mispricings if engaging in strategies around expiration days.

Conclusion

Quadruple witching (now often triple witching) is a recurring market event that concentrates derivative expirations and trading activity on four Fridays a year. Understanding its mechanics—how options and futures are exercised, hedged, and rolled—helps traders and investors anticipate volume patterns and manage the operational and price risks associated with expiration days.