On December 18 (this Friday), the US market will experience the last 'quadruple witching day' of the year, with SPX-related options worth a notional value of $2.5 trillion set to expire on December 18.
Quadruple witching day refers to the expiration and settlement date for derivatives in the US market on the third Friday of quarter months (March, June, September, December). On this day, four types of products expire simultaneously: stock index futures, stock index options, single stock futures, and stock options.
On quadruple witching day, the final hour of trading is referred to as the 'quadruple witching hour,' which occurs from 3 PM to 4 PM Eastern Time.
During the last few trading days of the year, large fund management firms adjust various positions. Historically, the number of December budget contracts opened is higher than other quarterly contracts, and the risk in outstanding budget contracts is also relatively higher compared to other quarters.
Risk and reward go hand in hand. On the final quadruple witching day, trading volume generally increases significantly as traders close their positions before the expiry of budget and futures contracts.
At the same time, the final hour...