Among the recurring events in options trading, triple witching dates are something you cannot afford to ignore. But what is triple witching? Occurring quarterly on specific Fridays, these are intense trading days when stock options, index options, and futures expire simultaneously. Learn about triple witching dates in 2024/2025 and how to trade them effectively.
Key takeaways
- The triple witching dates in 2024 are March 15, June 21, September 20, and December 20
- The triple witching dates in 2025 will be March 21, June 20, September 19, December 19
What Is Triple Witching?
To understand what triple witching is, focus on three asset classes:
Specifically, here is more information on the asset classes involved:
- Stock Options: These contracts give investors the right, but not the obligation, to buy or sell a stock at a predetermined price before the option expires. On triple witching days, regular monthly stock options listed on individual stocks or exchange-traded funds (ETFs) typically expire. Traders must decide whether to exercise, roll over, or let these options expire.
- Stock Index Futures: These are futures contracts based on stock indices like the S&P 500 or Nasdaq. They are often used for hedging and speculative purposes. On triple witching days, these futures contracts also expire, requiring traders to either close or roll their positions.
- Stock Index Options: These options are based on broader market indices such as the S&P 500. Like stock options, they give the holder the right to buy or sell the index at a set price before expiration. On triple witching days, these contracts also reach their expiration, necessitating decisions from traders on whether to close or roll their positions.
Triple witching occurs when the expiration dates for all three of these asset classes coincide, creating a high volume trading day with increased market volatility.
Impact on Market Volatility and Trading Volume
Triple witching dates in 2024/2025 can significantly impact market volatility and trading volume. The simultaneous expiration of these three types of derivatives can lead to increased trading activity as traders and institutional investors adjust their portfolios. This heightened activity often results in more significant price swings, as it has been observed in triple witching dates in 2024, making the market more volatile. As the contracts approach their expiration, especially during the triple witching hour—the last trading hour—volatility frequently spikes.
Specific Triple Witching Dates in 2024/2025
For those planning their trading strategies around these volatile periods, it’s crucial to be aware of the specific triple witching dates in 2024/2025:
- 2024: March 15, June 21, September 20, December 20
- 2025: March 21, June 20, September 19, December 19
These dates mark the third Friday of March, June, September, and December each year, when the convergence of expiring contracts occurs. In fact, you’ll often hear traders refer to the event as “triple witching Fridays”.
An Example of Triple Witching (Triple Witching Days 2023)
Let’s go back in time to give you a clear example. Suppose that, a few years ago, you looked for “triple witching days 2023” (if you’re here, you’re likely interested in triple witching dates in 2024/2025, but everything we’ll tell you on 2023 applies to future dates as well), and it’s September 15, 2023, one of the triple witching days. As the day begins, you notice a significant uptick in trading activity. Here’s a detailed breakdown of what happens during such a day.
Morning: Portfolio Adjustments
Institutional investors and market makers start their day by adjusting their portfolios to manage risk and capitalize on opportunities. With stock options, stock index futures, and stock index options all expiring simultaneously, they face critical decisions:
- Exercising Options: If an institution holds “in the money” options, they might opt to exercise these contracts to buy or sell the underlying assets at favorable prices.
- Rolling Over Contracts: To maintain their positions, many choose to roll over expiring contracts into new ones with later expiration dates. This helps them avoid immediate obligations while continuing to hedge or speculate.
- Letting Options Expire: For “out of the money” options, which are not financially advantageous to exercise, letting them expire can minimize losses.
Midday: Intensified Trading Activity
By midday, as you can observe during any triple witching dates in 2024/2025, trading volumes rise significantly as more market participants react to the expiring contracts. This surge is driven by various factors:
- Institutional Rebalancing: Large institutions continue to adjust their hedges and speculative positions, contributing to heightened activity.
- Market Sentiment: News events, economic data releases, and overall market sentiment play crucial roles, influencing whether traders decide to exercise, roll over, or let their options expire.
Afternoon: The Triple Witching Hour
As the end of the trading day approaches, the last hour, known as the triple witching hour, becomes particularly frenetic. Here’s what typically happens (note that this applies for triple witching dates in 2024/2025 as well):
- Surge in Trading Volume: The rush to close or roll over expiring positions leads to a flurry of trades. Investors and traders scramble to finalize their strategies, contributing to heavy trading volumes.
- Increased Volatility: The rapid execution of large orders results in significant price swings. This volatility peaks during the final minutes of trading, often leading to sharp, unpredictable movements in asset prices.
- Arbitrage Opportunities: Some traders look for arbitrage opportunities, taking advantage of temporary mispricings in the market resulting from the high-volume trading.
All the cases above tell you how you could have managed your trades during triple witching days in 2023. For full transparency, if we look back at what actually happened on September 15, we can see that this happened:
The S&P 500 declined by more than 1%, which is a substantial move in the index. The volatility was likely caused by the triple witching day (news reports mentioned tension over interest rate movement and inflation fears, which added to the market’s uneasiness).
In this case, a delta-neutral position would not have performed well, for instance. A good idea may have been to look at the SPY price action: a sudden move below the volume-weighted moving average in the intraday chart (or a false breakout above this) may have given you a nice bearish opportunity. This is a great teaching you should keep in mind when trading on triple witching dates in 2024/2025.
A Few Ideas to Trade the Triple Witching
How can you trade during the triple witching dates in 2024/2025? Here are a few strategies to consider:
Delta-Neutral Strategies: Iron Condors
One popular strategy you can use to manage the volatility of triple witching dates in 2024/2025 is using delta-neutral strategies like iron condors (in fact, you may find nice iron condor strategies on our options screener).
An iron condor involves selling a call and a put at one strike price while buying another call and put at different strike prices, all with the same expiration date. This strategy aims to profit from the low volatility typical between two set price points:
- Setup: Sell 1 out-of-the-money (OTM) call and 1 OTM put, then buy 1 further OTM call and 1 further OTM put.
- Benefit: Limits maximum loss and allows profitability if the stock price remains within a specific range on triple witching dates in 2024/2025.
Rolling Over Positions
As triple witching Fridays approach, traders often have to decide whether to roll over their positions. Rolling over involves closing the expiring contract and opening a new one with a later expiration date. This can be particularly useful for maintaining exposure or hedging without immediate obligations.
- Example: Let’s consider triple witching dates in 2024. If you hold a stock index future expiring on September 20, 2024, you might close it and open a new contract expiring in December 2024.
- Benefit: Helps in managing long-term positions without incurring the costs and responsibilities of holding the underlying assets.
Arbitrage Opportunities
Triple witching days often present arbitrage opportunities due to temporary mispricing in the market. Arbitrage involves exploiting price differences between related assets or contracts to make risk-free profits.
- Example: Spotting differences between the price of a stock index future and its underlying index, traders can buy the underpriced asset and sell the overpriced one. Note that this is a super hard strategy, as you will likely never spot significant differences (meaning that, to make money, you will need to use a lot of capital).
- Benefit: Profits from discrepancies that usually correct themselves quickly.
Risk Management Practices
Given the heightened volatility and trading volume during the triple witching hour, effective risk management practices are essential. Here are some tips for the last trading minutes of triple witching dates in 2024/2025:
- Stop-Loss Orders: Set stop-loss orders to limit potential losses. This automatically sells your position if the price moves against you by a specified amount. (Example: If you hold a stock option contract at $50, set a stop-loss order at $45 to limit losses if the price falls).
- Position Sizing: Keep your trade sizes smaller than usual to mitigate the impact of sudden market swings (Example: Suppose you are looking at triple witching days in 2024. If you usually invest $1,000, consider investing only $500 on a triple witching day).
- Diversification: Avoid putting all your capital into one type of derivative. Spread your investments across various assets to reduce risk (Example: Being too exposed to Nasdaq index options might be dangerous if tech stocks experience a sudden decline).
Quadruple vs Triple Witching Dates in 2024/2025
Finally, we should tell you about a common point of confusion: the difference between triple witching and quadruple witching. Historically, quadruple witching referred to the simultaneous expiration of four types of financial contracts on the third Friday of March, June, September, and December:
- Stock Options: Contracts that let the holder buy or sell a stock at a specified price.
- Stock Index Options: Options on indices like the S&P 500 or Dow Jones.
- Stock Index Futures: Futures obligating the purchase or sale of an index at a set price on a given date.
- Single-Stock Futures: Contracts on individual stocks (no longer traded in the U.S. since 2020).
Since 2020, the delisting of single-stock futures means that current references to quadruple witching actually describe what is now triple witching. Thus, the terms are often used interchangeably. On these days, also known as triple witching Fridays, the convergence of these expirations prompts heightened trading activity and volatility, especially evident during the triple witching hour, the final hour of trading.
