Four times a year, the stock market experiences an event called quad witching. These days see significantly higher trading volume and unusual price movements as multiple types of derivatives contracts expire simultaneously. Understanding quad witching can help you navigate or even profit from these volatile sessions.
What is Quad Witching?
Quad witching, also called quadruple witching, occurs when four types of derivative contracts expire on the same day:
- Stock index futures - Contracts based on indexes like the S&P 500
- Stock index options - Options on indexes like SPX
- Single stock options - Options on individual stocks
- Single stock futures - Futures on individual stocks (though less common now)
When it Occurs: Quad witching happens on the third Friday of March, June, September, and December. These are the only four days each year when all four contract types expire together.
Why Does Quad Witching Create Volatility?
The simultaneous expiration of multiple contract types creates unusual market dynamics.
Massive Position Unwinding
Institutional investors, hedge funds, and market makers must close, roll, or settle trillions of dollars worth of positions. This concentrated activity overwhelms normal market liquidity.
Delta Hedging Adjustments
Market makers who sold options must constantly adjust their stock positions to stay delta neutral. As options approach expiration with high gamma, these adjustments become more frequent and larger, pushing stock prices around.
Index Rebalancing
Many index funds and ETFs rebalance their portfolios around the same time as quad witching, adding to the order flow imbalance.
Arbitrage Unwinding
Complex arbitrage positions involving futures, options, and stocks must be closed out, creating cascading order flows.
Quad Witching by the Numbers
The statistics around quad witching days are remarkable.
Typical Quad Witching Volume
- Trading volume often exceeds 150% of average daily volume
- The final hour (witching hour) can see 30-40% of the day's total volume
- Bid-ask spreads typically widen 20-50% during peak activity
- Trillions of dollars in notional value expires
The Witching Hour
The final hour of trading on quad witching day, from 3:00 PM to 4:00 PM Eastern, is called the witching hour. This is when the most dramatic price movements typically occur.
During this hour:
- Market makers make final adjustments to their hedges
- Large institutional orders flood the market
- Stocks can swing several percent in minutes
- Prices often revert to normal after 4:00 PM
The witching hour can be profitable for nimble traders but dangerous for those caught on the wrong side of sudden moves.
Historical Patterns
Researchers have studied quad witching days extensively. Here are common patterns.
Increased Volatility
Intraday price swings are typically 50-100% larger than normal days. However, the closing price often ends near where it would have been anyway. The volatility is noise, not signal.
Morning Calm, Afternoon Storm
Quad witching days often start normally but become increasingly volatile as expiration approaches. The first half of the day may seem uneventful.
Post-Expiration Reversal
Stocks pushed to extreme levels during quad witching sometimes reverse the following Monday as artificial pressure subsides.
Trading Strategies for Quad Witching
Different approaches work depending on your risk tolerance and style.
Strategy 1: Avoid It Entirely
Many experienced traders simply do not trade on quad witching days. The increased noise and randomness make technical analysis less reliable, and spreads widen. Taking the day off costs nothing.
Strategy 2: Close Positions Before
Close any options positions by Thursday before quad witching Friday. This avoids the unpredictable expiration dynamics and lets you reestablish positions the following week.
Strategy 3: Trade the Volatility
If you are comfortable with fast-moving markets, quad witching offers opportunities. Scalping the large intraday swings can be profitable for skilled day traders with proper risk management.
Volatility Trade Example
During the witching hour, SPY drops 1% in 20 minutes on heavy volume but no news.
- Recognize this as likely expiration-related, not fundamental
- Buy the dip with tight stops
- Target a bounce back toward VWAP
- Take profits quickly - do not get greedy
This works because many quad witching moves are technical, not fundamental.
Strategy 4: Sell Premium
Implied volatility sometimes spikes heading into quad witching. Selling options before the event and buying them back after can capture this volatility premium.
Risks to Avoid
Quad witching creates several pitfalls for unprepared traders.
- Do not hold expiring options: Gamma risk is extreme, and prices can move against you instantly
- Do not assume trends continue: A move driven by expiration mechanics can reverse immediately
- Do not overtrade: Higher volume does not mean better opportunities
- Do not ignore wider spreads: Transaction costs are higher than normal
Triple vs Quad Witching
You may hear the term triple witching. This refers to when three contract types expire (excluding single stock futures, which have declined in popularity). In practice, triple and quad witching create similar market conditions.
The regular monthly options expiration on non-quarterly third Fridays is less dramatic because only stock options expire, not index futures and index options.
Marking Your Calendar
Quad witching always occurs on the third Friday of:
- March
- June
- September
- December
Mark these dates on your trading calendar so you are never surprised. Many traders also note the Thursday before as a deadline for closing positions they do not want to hold through expiration.
Pro Tip: The week of quad witching often sees increased volume starting Wednesday as institutional traders begin positioning. The unusual activity is not limited to Friday alone.
Track Market Events
Pro Trader Dashboard helps you track important market events including options expiration dates. Stay informed and plan your trades around high-volatility periods.
Summary
Quad witching occurs four times a year when stock index futures, stock index options, single stock options, and single stock futures expire simultaneously. These days see dramatically higher volume and volatility, especially during the final hour of trading. Most traders are best served by closing positions before quad witching or simply avoiding trading that day. Those who do trade should expect wider spreads, larger price swings, and moves that may have nothing to do with fundamentals.
Learn more about expiration dynamics with our guides on options expiration dates and what happens when options expire.