What you need to know about stock market 'witching days' — and why you shouldn't fear them

"Witching days" on the stock market are nothing new, but they still can cause a lot of volatility. Here's an explanation of what they are and why they're nothing to be alarmed about.


The market has been volatile enough lately that you may not have noticed one recent day in particular that's traditionally unsettled: a so-called "witching day."

A witching day on the market doesn't have anything to do with boiling cauldrons, flying broomsticks, or black cats, but it is a day when strange and often unpredictable things happen. In short, it's when several forces affecting the stock market, mostly having to do with stock options and index rebalances, all happen at once. And even though experts know exactly when witching days will occur, they can still give investors headaches.

What causes a 'witching day'

Witching days, which are actually quite common, occur on the specific day during the quarter when a set of options expire. For example, stock options expire on the third Friday of every month — that could be considered a witching day.

There are multiple types of options, and on some dates, they expire simultaneously, creating double, triple, or quadruple witching days. Quadruple witching days occur four times every year, on the third Friday during the months of March, June, September, and December. So, on those days, stock index futures, stock index options, stock options contracts, and single stock futures all expire.

The most recent quadruple witching day was June 19, and the next one will be on September 18. The next double witching day is July 17.

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On top of those expirations, some of the big stock market indices, like the S&P 500, traditionally rebalance once per quarter. If that happens on or near a witching day, it can add additional uncertainty to an already volatile market. 

The uncertainty around so many options expiring at once "creates these huge surges of volatility and gyrations in the market as people try to size up their positions," says Joe Williams, director of investment strategy at Missouri-based Commerce Trust Company.

All of that volatility in the markets can seem scary. While witching days used to be a bigger deal for investors in years past, these days most don't directly deal with options. So experts say investors are unlikely to realize a witching day just occurred, although they may notice that the market is bouncing around.

'There isn't much you can do to prepare'

The important thing for the average investor to keep in mind is that witching days occur often, and they can create brief stretches of market bumpiness. But since they're a normal part of market functions, and the turbulence they create is baked into market expectations, they're generally not that big of a deal.

As Williams says, they're certainly not something you should worry about. "It's a one-day event," he says. "There isn't much you can do to prepare."

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Witching days don't merit drastic moves with your money or portfolios, says Jedidiah Collins, a Washington state-based author and certified financial planner. The volatility will work itself out in a day or two, he says, and if you panic and decide to move your money around based on a short stretch of volatility, you may need to do some course-correcting to make sure you're still in line to meet your long-term financial goals.

So ignore any noise, and stick to your existing strategy.

"Keep the long term in mind," Collins says, and the best way to do that is to slow down and think your decisions through. "You'll get a lot of clarity when you just stop to breathe."

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