Why do the US stocks go "crazy" during the Quadruple Witching Day?

Every year, there are four days when the US stock market becomes unusually volatile. Traders call these days “Quadruple Witching Days.” What exactly happens on these four days that causes the normally stable market to suddenly become turbulent?

What is the Quadruple Witching Day all about?

Simply put, Quadruple Witching Day is the settlement date for US derivative financial products. Stock index futures, stock index options, single-stock futures, and single-stock options all expire and settle on the same day each quarter.

It sounds like just an administrative date, but in reality, it triggers a “butterfly effect” in the market. Futures and options are contracts for “future prices,” and at settlement, futures prices must converge with spot prices. During this process, an invisible force seems to be twisting the market, hence the name “Witching.”

Four times a year, on the third Friday of March, June, September, and December.

2024 Quadruple Witching Schedule

Want to avoid these “storm days”? Mark these dates:

• Q1: March 15 (Friday)
• Q2: June 21 (Friday)
• Q3: September 20 (Friday)
• Q4: December 20 (Friday)

If you are trading with leverage on these days, be extra cautious, as volatility can trigger forced liquidations.

Why do Quadruple Witching Days make the market “crazy”?

As settlement approaches, the spread between futures and spot prices gradually narrows. To maximize profits, large traders may manipulate price movements before settlement, pushing oversold stocks higher and suppressing overbought stocks. This behavior is especially pronounced in the last hour before settlement, sometimes called the “Witching Hour.”

The results are:

Trading volume surges — the trading volume on these days is often among the highest of the year.

Prices deviate from fundamentals — stocks swing based on market sentiment rather than underlying value.

Volatility spikes — market makers control the market, retail investors chase gains and sell off, creating a highly emotional environment.

Historical data is quite interesting: since 1994, most large traders tend to push spot prices higher on these days. The result? About 88% of overbought stocks decline within a week afterward, and the S&P 500 typically drops by an average of 1.2%. This is a classic “market manipulator pulls up prices and then leaves” pattern.

How does this affect different investors?

Long-term investors: The volatility during Quadruple Witching Days has little impact on you. Over the long term, stock prices will still revert to fundamentals. Short-term market chaos and chip-flipping have nothing to do with your investment logic.

Short-term traders: This is a carnival. In the week before and after Quadruple Witching, market sentiment and chip movements tend to dominate over technicals and fundamentals. Traders looking to profit from market makers can take advantage—buy oversold stocks and short overbought ones.

But note: This kind of trading is purely a game of chips, unrelated to company fundamentals. Never mistake the direction and force a trade; strict stop-loss discipline is essential, or you could suffer heavy losses during reversals.

How to prepare for 2024

Currently, the US stock market remains in an AI bull run, and it’s expected that this year’s Quadruple Witching Days will continue the overbought pattern (unless there’s a major market reversal).

Additionally, if you hold futures or options positions, remember to roll over your contracts early before settlement. As expiration approaches, liquidity worsens, spreads widen, and rollover costs increase. Instead of being forced to roll over in a poor liquidity environment, plan ahead.

Pro tip: The volatility during Quadruple Witching Days is predictive—bullish years tend to overheat, bearish years tend to decline. Keep a close eye on market trends; the performance during these days often reflects market expectations.