Mastering the Quadruple Witching Pattern: The Market Truth Behind US Stock Derivatives Expiration Dates

Every March, June, September, and December, the third Friday of the month, the US stock investment community prepares thoroughly for the “Quadruple Witching” days. In 2024, the Quadruple Witching days fall on March 15, June 21, September 20, and December 20. Why are these four days so special? Because they represent the settlement times for four major derivative financial products: US stock index futures, stock index options, single-stock futures, and single-stock options. They are also the periods of most intense trading throughout the year.

Essential Course for Short-Term Traders

Why do Quadruple Witching days trigger market anomalies? The core reason lies in momentum-driven factors. As derivatives approach expiration, futures prices inevitably converge toward the spot prices. If market bulls have strong expectations, futures prices will be above the spot; the opposite is true for bears. But as the settlement date approaches, this price gap gradually narrows, causing significant volatility.

More importantly, large institutional players will showcase their presence during these four days. To settle derivatives at more favorable prices, they often forcibly push up oversold stocks and suppress overbought stocks. Historical data shows that since 1994, in a long-term bullish environment for US stocks, 88% of stocks that surged excessively on Quadruple Witching days declined in the following week, with the S&P 500 averaging a decline of 1.2%. This “initial push followed by a sharp drop” tactic has become a market consensus, attracting many retail investors hoping to “grab a share” and follow the trend.

The Most Critical Settlement Period: Quadruple Witching Hour

The last trading hour of the Quadruple Witching day is particularly important, known in the industry as the “Quadruple Witching Hour.” During this time, the settlement price for derivatives is calculated based on the average spot price, making this hour the most intense period for institutional manipulation. Trading volume often peaks during this hour, and price swings are the most ferocious—completely detached from fundamentals and technical analysis, driven purely by capital battles.

Long-Term Investors Can Ignore, Short-Term Traders Must Be Cautious

For long-term investors holding stocks for years, the volatility on Quadruple Witching days is a “false alarm.” After all, stock prices will eventually revert to fundamentals, and short-term momentum distortions are harmless. However, for short-term and momentum traders, price movements during the week before and after Quadruple Witching are worth paying close attention to.

Strategically, those expecting a rebound from oversold conditions can go long amid volatility; those anticipating a correction after excessive gains can consider short positions. But remember: these gains are driven by momentum rather than fundamentals, so strict stop-loss discipline is essential. Holding these trades long-term can be very risky.

Investment Advice for 2024 Quadruple Witching Days

Since US stocks remain supported by AI themes this year and maintain a bullish trend overall, it is expected that the “overbought” momentum will continue during Quadruple Witching—provided there are no major market reversals. Investors can formulate trading plans accordingly.

Another practical tip: if you hold futures or options positions, it’s best to roll over or close your positions before the Quadruple Witching days. As the settlement date approaches, liquidity will significantly deteriorate, trading costs will rise sharply, and this may erode expected profits. Investors using leverage should be especially cautious to avoid forced liquidations caused by excessive price swings.