How do quadruple witching days trigger intense volatility in the US stock market?

Every year, there are four days that investors always discuss with furrowed brows—these are the legendary quadruple witching days. Many retail investors are forced to close positions during these days, while short-term traders thrive, and market makers sharpen their knives. But what exactly makes these four days so powerful? Why do they cause震盪 in global markets?

The Essence of Quadruple Witching: The Ultimate Showdown Between Derivatives and Spot Markets

What is quadruple witching? Simply put, it refers to the days when the four major US derivative financial products expire simultaneously. These four types include single-stock futures, single-stock options, stock index futures, and stock index options.

The name “witch” comes from a financial phenomenon: as futures approach delivery, their prices are forcibly pulled toward the spot price by an invisible force (industry insiders call it “witch power”). This is not based on economic fundamentals but purely on technical demand—derivatives must align with the underlying asset.

Why do quadruple witching days occur four times a year? Because US stock derivatives use quarterly settlement, with a集中交割 at each quarter’s end. Therefore, on the third Friday of March, June, September, and December, these four days become the “devil’s moments” in the financial markets.

2024 Quadruple Witching Schedule

Investors must remember these four dates and prepare for possible market volatility:

Complete List of 2024 Quadruple Witching Days

• Q1: March 15 (Friday)
• Q2: June 21 (Friday)
• Q3: September 20 (Friday)
• Q4: December 20 (Friday)

For leveraged investors, these days are especially risky. Exchange stop-loss mechanisms can trigger faster in high volatility environments, leading to forced liquidations if not careful.

Why Do Quadruple Witching Days Trigger Market Madness

On these days, three typical phenomena occur: trading volume surges, volatility reaches yearly highs, and stock prices become severely disconnected from fundamentals.

The logic behind this is simple yet ruthless. Buyers of futures and options are purchasing “promises of the future.” If the market expects the future to be bullish, futures prices will be higher than the spot; conversely, if bearish, they will be lower. But as settlement approaches, this “spread” gradually converges to zero. To facilitate this convergence, market participants generate大量交易 in the last hour (also called the “quadruple witching hour”).

Most importantly, the settlement price is based on the average spot price during the last hour of the day. This means whoever controls the last hour’s price can determine the delivery price of derivatives—and thus their own profit or loss.

Market makers become extremely active at this moment. Institutions holding大量期貨合約 will mobilize funds to push stock prices in a direction favorable to them. If they are bullish, they will force prices higher; if bearish, they will push prices down. The ultimate goal is to keep the spot price within their most advantageous range.

Retail investors also notice this pattern. Seeing the market makers move, more and more try to “eat the market maker’s tofu,” causing trading volume on quadruple witching days to often be among the highest of the year.

According to statistics, since the US stock market has been in a long-term bullish trend since 1994, market makers tend to control the market upward on most quadruple witching days. The result? 88% of stocks artificially pushed higher will pull back within the following week; the S&P 500 index averages a decline of 1.2% after these days.

Why Does This “Push Up and Then Drop” Pattern Occur

The超漲 on quadruple witching days is not based on performance or market sentiment but purely on capital game. Market makers, to settle derivatives at higher prices, will lift stock prices in the spot market—but these levels are often above the stock’s reasonable valuation.

Once settlement is complete, their目的 has been achieved. Without new buying to push prices higher, retail investors and hedge funds will gradually take profits, and stock prices will naturally fall back to levels supported by fundamentals. This is why quadruple witching days are not risks but a feast of chips.

Of course, there are exceptions. In bear market years, market makers expect declines, and quadruple witching days may see oversold rebounds. There are also rare cases where retail investors trying to “eat the tofu” of market makers cause the funds to be反向爆炸—what market terminology calls “爆莊.”

The Different Impacts of Quadruple Witching on Various Investors

For long-term investors holding stocks for ten years, the volatility on quadruple witching days is negligible noise. Stock prices will ultimately return to fundamentals, and technical pushes on these days are temporary.

But for traders focusing on chips and short-term traders, quadruple witching days are the four most important trading days of the year. The market maker’s control, institutional position adjustments, and retail sentiment resonance—these factors peak during these days. Therefore, price fluctuations in the week before and after quadruple witching often far exceed normal daily movements.

Short-term traders’ strategies should be: if they judge a stock is oversold, they can go long near quadruple witching; if they think a stock is overbought, they can short and wait for a pullback. But the premise is strict discipline—these fluctuations are unrelated to fundamentals. If you are wrong, do not hold on stubbornly; exit immediately to cut losses.

Special Context for 2024 Quadruple Witching Days

Currently, the US stock market remains driven by the AI technology wave, with a generally bullish trend. It is expected that the 2024 quadruple witching days will continue to show bullish control—unless there is a major market reversal.

At the same time, for investors holding futures or options, quadruple witching not only means extreme volatility but also the approaching expiration of contracts. If you are not a professional short-term trader, it is advisable to提前轉倉 or close positions before these days. As the expiration date nears, liquidity decreases, transaction costs increase, and slippage losses during rollover can be larger.

In summary, what is quadruple witching? It is a concentrated爆發 of market microstructure, the ultimate showdown between market makers and retail investors, and a test of investment discipline. Understanding it, respecting it, but not being迷住 it—this is the attitude professional investors should have.