Market Wide – Quad Witching

This is an event that happens 4 times each year, when all index and single stock futures contracts expire AND index and single stock options expire, on the same exact day.  The effect of this can be bearish because the contracts that are expiring are sold off and create a larger supply of sales than average on that day.  The bearish effects can sometimes start early, with traders fearing the possible upcoming market selloff and therefor avoiding taking new positions in expiring options and futures for the days and week(s) ahead.

It is hard to predict what will happen, but it is objective fact that all four of these derivative contracts are expiring, and those that are “in the money” will be exercised and thereby give the holder of those newly exercised shares the ability to sell into the market.