The Four Witching Days of 2024 are approaching: Why are US stocks most volatile during these four days?

The 2024 Quadruple Witching Days Schedule Is Out—March 15, June 21, September 20, December 20. What do these four trading days mean for US stock investors? Simply put: days with surging trading volume, amplified price volatility, and the most obvious market manipulation by big players.

What Exactly Are Quadruple Witching Days? Why the Name “Witch” Day

Quadruple Witching Days sound mysterious, but they are actually the days when the four major US derivatives expire simultaneously—stock futures, stock options, stock index futures, and index options—all settle once every quarter, on the third Friday of March, June, September, and December.

Why are they called “Witch” Days? Because at the settlement moment, futures prices must converge with spot prices, as if an invisible “witchcraft” pulls the prices together. This price fluctuation, purely driven by derivatives’ characteristics and unrelated to the company’s fundamentals, is vividly called Quadruple Witching Day.

Why Will Price Volatility Be So Large in 2024 on These Days

The key lies in the time value characteristics of derivatives. Futures and options trade on “future prices.” For example, if bullish expectations dominate, futures prices will be higher than spot prices; if bearish, the opposite. But as the settlement date approaches, this spread gradually narrows.

In the last hour before the quadruple witching (called the Witching Hour), exchanges use the average spot price during this hour to settle derivatives, making this hour the critical moment for “price setting battles.”

At this time, market manipulators are most active: they mobilize large funds to push up oversold stocks or suppress overbought ones, moving the settlement prices of derivatives in their favor. Opportunistic retail traders also swarm in, causing trading volumes on these days to be among the highest of the year.

Three Market Phenomena of 2024’s Quadruple Witching Days

1. Trading volume and price volatility spike simultaneously

On these days, overall market trading volume far exceeds normal levels. Retail investors, big players, and institutional investors all place orders during these hours, resulting in stocks or indices experiencing intense swings in a short period.

2. Fear index rises, market turnover soars

Funds flow rapidly in and out, positions change significantly, and investor sentiment fluctuates greatly. Not only do prices fluctuate, but the market sentiment thermometer—the Fear Index—also rises accordingly.

3. Prices deviate from fundamentals

This is the most distinctive feature of quadruple witching days: companies with no change in fundamentals may see their stock prices soar or plunge due to capital game-playing. Such distortions often gradually correct within a week after the event.

Historical Data Reveals Certain Patterns

Based on historical statistics (since 1994), because the US stock market has been in a long-term bull trend, big players tend to push spot prices higher during quadruple witching days. As a result:

• Over 88% of overbought stocks tend to pull back within the following week
• The S&P 500 index typically declines by about 1.2% in the week after a quadruple witching day

This indicates that big players raise prices to profit, but retail investors chase the rally, and when no new buying interest emerges, these stocks tend to fall back after taking profits.

Practical Investment Tips for 2024

For long-term investors: Generally, ignore the volatility around quadruple witching days. Because stock prices will eventually return to their fundamental values, short-term capital fluctuations cannot change the company’s true worth. Stick to your investment strategy and don’t panic sell due to temporary price swings.

For short-term traders: This is both an opportunity and a trap. Price swings are largest within a week before and after these days. If you are skilled in capital-based trading, you can buy on oversold rebounds or short on overbought declines. But remember:

• These fluctuations are unrelated to fundamentals, just capital games
• Set strict stop-losses; avoid holding overly risky positions
• Only engage in short-term trading; don’t rely on quadruple witching days to double your money

For derivatives holders: If you participate via futures or options, consider closing or rolling over positions before expiration—especially for longer-term holdings—not just short-term speculation. Liquidity drops, trading costs increase, and rollover fees also rise as the date approaches.

Outlook for 2024’s Quadruple Witching Days in the Current Context

Currently, the US stock market still benefits from AI-driven bullish momentum. If no major reversals occur, this year’s quadruple witching days are likely to continue the bullish trend. However, be aware that:

• Market risks are still manageable for now, but any black swan event could change the situation
• Keep an eye on Federal Reserve policies, as they influence the overall bullish or bearish trend throughout the year
• Avoid excessive leverage around these days; investors with limited risk tolerance should stay cautious

In summary, 2024’s quadruple witching days are not something to avoid but to understand their mechanics and decide whether to participate based on your investment style.