Quadruple witching is a financial market phenomenon that occurs four times a year on the third Friday of March, June, September, and December. On these days, four types of derivative contracts expire simultaneously:

1. Stock Index Futures: Contracts to buy or sell a stock index at a predetermined price on a specific future date.

2. Stock Index Options: Options to buy or sell a stock index at a specific price before the option expires.

3. Stock Options: Options to buy or sell individual stocks at a specific price before the option expires.

4. Single Stock Futures: Contracts to buy or sell a specific stock at a predetermined price on a specific future date.

Key Points About Quadruple Witching

- Increased Volatility: The simultaneous expiration of these contracts often leads to increased trading volume and market volatility as traders and investors adjust or close out their positions.

- Market Impact: It can lead to significant price swings, especially towards the end of the trading day, as large institutional investors rebalance their portfolios and roll over their contracts.

- Opportunities for Traders: Some traders seek to capitalize on the increased volatility and trading opportunities presented during quadruple witching days.

Reasons for Market Volatility

- Portfolio Adjustments: Investors may need to rebalance their portfolios to reflect the expiration of these contracts.

- Arbitrage Opportunities: The differences in prices between the expiring contracts and the underlying assets can create arbitrage opportunities, driving additional trading activity.

- Option Exercises: The exercise of a large number of options contracts can result in significant buying or selling pressure on the underlying assets.

Historical Context

The term "quadruple witching" derives from "witching hour," which refers to a time of unpredictability. Originally, there were only three types of contracts expiring simultaneously (known as "triple witching"), but the addition of single stock futures in 2002 added a fourth component, leading to the term "quadruple witching."