What Friday’s Triple-Witching Means For You

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Key Takeaways

  • Markets were buoyant on Thursday ahead of Friday’s triple-witching, which refers to the simultaneous expiration of stock options, index options, and index futures contracts.
  • Triple-witching often results in greater trading volume and volatility, especially in the final hour of the session.
  • The majority of long-term, buy-and-hold investors shouldn’t be too worried, as heightened volatility and unexpected price swings are likely to be short-lived.

Stocks rallied to record highs on Thursday ahead of one of Wall Street’s scariest-sounding events, set for Friday: a triple witching.

“ Triple witching ” refers to the simultaneous expiration of stock options , index options, and index futures contracts . It occurs four times a year—on the third Fridays of March, June, September, and December—and can be known to trigger sharp price movements as traders close out or extend existing positions.

Friday’s edition comes at a critical moment for the stock market. The S&P 500 closed at an all-time high on Thursday as stocks rallied after the Federal Reserve on Wednesday cut interest rates by half a percentage point.

It was a bumpy ride to yesterday’s rate cut, with jitters about a weakening labor market and stretched tech valuations contributing to several big sell-offs in recent months. The Cboe Volatility Index ( VIX ), or “fear gauge,” stood at about 16.5 on Thursday, down from spikes in early August and September but still above its 2024 average.

What Triple-Witching Means for You

Triple-witching days often coincide, as is the case Friday, with S&P index rebalancing , which generates additional trading volume and can contribute to volatility. Palantir ( PLTR ) and Dell ( DELL ) will join the benchmark S&P 500 after Friday’s close; so will insurance company Erie Indemnity ( ERIE ). Those stocks and the ones they’re replacing—American Air Lines ( AAL ), Etsy ( ETSY ), and Bio-Rad Laboratories ( BIO )—could see high volume on Friday as funds tracking the index buy and sell shares.

But for the majority of long-term buy-and-hold investors, the volatility exhibited on triple-witching days shouldn’t be ominous. Unusual price movements are often short-lived and, because investors know triple-witching is happening, turbulence is unlikely to materially change market sentiment.

Triple-witching is of greatest concern to active traders whose derivatives are expiring. The last hour of the session, the triple-witching hour , brings a flurry of activity that can affect liquidity . Sometimes the dynamics of triple-witching result in a less liquid market for a certain security, which increases spreads and creates opportunities for arbitrage , in which a trader exploits price differentials between markets.