Triple Witching Days

In the past year, U.S. stock market volume has been 96.5 percent higher on "Triple Witching Days." Those days are the third Fridays of March, June, September and December, when the month- or quarter-long contracts for stock options, index options and index futures expire. The next time this happens is Friday, Sept. 16. Stock futures also expire then, leading some to call it a "quadruple witching day."

As expiration day approaches, traders are busy replacing futures and options with contracts for future months and quarters. That leads them to adjust other holdings, which boosts trading volume. Before rules changes and the advent of electronic trading, this made for chaotic and volatile trading sessions, says Randy Frederick, director of trading and derivatives for Charles Schwab. Even now, traders are warned to prepare, especially if big news hits. With so much volume, "things are going to move around more than they otherwise might," Frederick says.

"Everyone expects volatility heading into triple witching week," says Rocky White, quantitative analyst at Schaeffer's Investment Research. This "fear is what's dampening volatility." Since 2006, witching weeks have been slightly more than half as volatile as non-witching weeks. Many traders use options and other strategies to protect holdings during witching week, limiting reasons to panic, he says. There's also no consistent pattern for stocks on witching days, Frederick notes, so no reliable way to make money. The best advice may be to ignore witching worries and take normal safety precautions when trading, such as using limit orders to lock in prices.