The Wall Street has had a good week of recovery. However, the indices have been struggling to sustain highs. While the Dow Jones closed 300 points higher on Wednesday, it corrected nearly 300 points from the highs. This was also seen on Thursday's trading session, however, the Dow Jones ended below the flat line.
The indices will be put to test on Friday, when the investors and indices will grapple with the quarterly "triple witching" phenomenon.
Triple Witching is an event that takes place on the third Friday of March, June, September and December. For those not aware of this phenomenon, Triple Witching, or the simultaneous expiration of stock options, index futures, and index options, occurs four times a year. The first triple witching of 2025 will take place this Friday.
This phenomenon was earlier called as 'Quadruple Witching', with single-stock options also expiring on the same day. However, the single-stock options have not traded since 2020 and hence they have been renamed Triple Witching.
This will take effect during the final hour of trading session when the contracts expire. One can expect unusual price movement as traders will be looking to adjust or close their positions in a stock or index option. This makes it natural for the stocks with lower market capitalisation and heavy derivatives volumes to see higher movements during this event.
Why Is This Important?
The phenomenon on Friday is very important as the markets are still struggling to maintain the gains and the market sentiment continue to remain fragile. During the last Triple Witching phenomenon in December 2024, the markets ended higher. Whether Wall Street will continue to gain through Friday's session is yet to be seen. Especially after fresh bout of instability gripped the stock market on Thursday.
According to Bloomberg, $4.5 trillion of options contracts expire on Friday. The S&P 500 fell 0.2%. The Nasdaq 100 slid 0.3%. The Dow Jones Industrial Average ended flat.
After Friday's event, the phenomenon will next occur on June 20, Sept. 19 and Dec. 19.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
