Triple witching is an unusual market phenomenon that can cause increased volatility, though it happens only four times per year. Triple witching can offer an opportunity for investors to take advantage of a more volatile market and put more money to work.
Here’s what triple witching is, when it takes place and how investors can benefit.
What is triple witching?
Triple witching is the simultaneous expiration of important options and futures contracts on the third Friday of March, June, September and December. This event can cause increased trading activity and volatility on exchanges as traders close out contracts or prepare to exercise them.
The three types of contracts that expire on triple-witching days include the following:
- Stock options: All stocks with available options have monthly option contracts that expire on the third Friday of the month.
- Stock index options: These options are based on major stock indexes such as the S&P 500 or the Nasdaq.
- Stock index futures: Futures contracts based on major indexes such as the S&P 500 and the Nasdaq also expire then.
By the end of trading on that third Friday, investors must decide whether they’re going to hold their contracts through the close (with a potential exercise of the contract) or close them out. Traders may be closing out stock and index positions, closing out a hedge position matched to a contract or raising cash from other positions to fund their purchase of a contract’s deliverable. All of these actions can increase volume and volatility on that day.
Triple-witching days in 2024, 2025 and 2026
Triple witching occurs on the following days in 2024, 2025 and 2026:
March 15, 2024
June 21, 2024
Sept. 20, 2024
Dec. 20, 2024
March 21, 2025
June 20, 2025
Sept. 19, 2025
Dec. 19, 2025
March 20, 2026
June 19, 2026
Sept. 18, 2026
Dec. 18, 2026
Triple witching example
As one part of triple witching, traders are closing out or exercising their stock options. For example, traders may be closing options positions, selling to close a long contract or buying to close a short contract. If they have a hedge on these positions using stock, they may also be simultaneously unwinding that hedge, buying or selling the corresponding stock as appropriate.
Traders may also decide to exercise these stock options, choosing whether to take delivery on long call options and exercise put options. If they’re exercising a long call and taking delivery on the stock, they’ll need cash or enough margin capacity to purchase the stock and may need to sell stocks to fund the exercise of the call. At the same time, traders with short puts may be forced to buy stock, meaning they’ll need to have cash or margin to fund the purchase.
All this trading, closing out and exercising can cause a lot of volatility, but it’s more or less the same story two more times, for both stock index options and stock index futures. In sum, the expiration of all three combine to create extra volatility in the markets.
Triple witching vs. quadruple witching
For years, those third Fridays at the end of March, June, September and December were subject to quadruple witching instead of triple witching. Quadruple witching refers to the expiration of the three derivatives contracts of triple witching plus the expiration of single-stock futures contracts. These were futures contracts based on an individual stock such as Microsoft or Amazon.
However, as of 2020, these single-stock futures contracts no longer trade in the U.S. markets. With the demise of single-stock futures contracts, quadruple witching reverted to triple witching.
Triple witching day strategies
Triple witching may be a good trading opportunity or largely a non-event, depending on how you approach the market.
Short-term traders such as day traders may find triple witching offers them extra volatility, which they may be able to take advantage of through some quick trades. These traders may be able to buy short-term dips and then sell them the same day or shortly thereafter for a gain. Similarly, they may be able to short sell stocks that have risen due to a short-term blip in volatility.
Long-term buy-and-hold investors may be able to largely overlook triple witching because they’re focused on what stocks to do over longer periods. But even they, too, may be able to take advantage if a stock or index drops, allowing them to put some money to work at somewhat more favorable prices. But they’re not looking for a quick “flip” like a trader would be.
Option traders may find triple witching to be particularly attractive because of the huge potential swings that can occur in options prices, much greater than what occurs to a typical stock or index. On this day, all expiring stock options are zero-day options, so they have little time value remaining and therefore even modest stock moves could make the right options very profitable.
The best brokers for options trading can help you get started with options as well as stocks.
Bottom line
It’s important to be aware of triple witching, but don’t let it spook you. Because of the heightened volatility on this day, it can be an attractive opportunity for short-term traders and even long-term investors who may want to take advantage of a potential short-term dip and put money to work.
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