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Some traders this week are eagerly anticipating Friday’s “Quadruple Witching Hour,” No, this is not an early Halloween or secret ritual held on the floor of the New York Stock Exchange. This weirdly named phenomenon is the final hour of a trading day when stock-index options, index futures, individual stock options and individual stock futures all expire at the same time. It happens four times a year, the third Friday of March, June, September and December. Even if you don’t know what an option or future is (more on that in a minute), the expiration of all these investment products at once can create some huge price moves in both the broader market and individual stocks.
Traders say that there’s no real reason why all of these products should expire at once, other than tradition. But the fact that they do creates a great deal of volatility. In general the volume of stock trading goes up during any expiration week, and this week has been no exception. This Tuesday and Wednesday, 3.1 billion shares traded on the NYSE, a nearly 10% increase from the same two days last week. By Friday, many traders will start buying and selling all their various options and futures rapidly before 4 p.m. Eastern time (when the market closes) to lock in profits, make new bets or, in some cases, cut their losses.