What a triple witching day means for markets

our top story today for the markets Wall Street Rising for a triple witching here to explain what that is and whether or not it affects your portfolio we've got Yahoo finances Market domination co-anchor Julie Hyman hey Julie hey Brad well witching sounds spooky right um and that's because it is named after the sort of Witching Hour the we hours of the night when no good things happen but in this case it's not very scary right so let's get to what triple witching is here it's the expiration of different types of cont contracts here so triple witching which we have today you see the expiration of stock options contracts stock index Futures contracts and stock index options contracts we used to have quadruple witching which was also stock options Futures contracts but those don't really trade in the US anymore now this happens on the third Friday of every month where you just get the stock options expiry and then we get the triple on a quarterly basis on the third Friday of the month so that is what is happening today and according to various estimates we could get anywhere from $4.8 to 5.5 trillion do worth of these types of contracts that are expiring today so let's dig a little bit more into it by looking at a real world example of one of these contracts Nvidia Nvidia the second most active within this universe of these options contracts here and so there's a lot of open interest that is open contracts here uh on Nvidia this is just one that we picked that's expiring today this is the $140 call option lot of open interest more than 145,000 contracts here you could last buy this the last time we checked for two cents so for two cents you have the right to then take possession of 100 of these Nvidia shares at $140 however if by the last tick of the day today the stock is not at $140 and at last check it wasn't in fact yesterday we saw it reach $140 and then back off from that level then this this expires and you get nothing it's worthless however if by some chance the stock Rose to $140 today you could sell this uh contract potentially at a provit or you would take delivery of those all of this is a complicated way of saying that when people are making these various option buys um And Trades that it creates a lot of offsetting moves in the market either you take delivery of these shares and that creates an uptick in volume in the market or maybe you're doing an offsetting trade over there which also creates more volume in the market so all of this is to say you see a big uptick in volume on a day like this not necessarily volatility maybe a little bit of volatility at the margins in an individual stock but overall a big uptick in volume overall on the market today between these index options and Futures and then the individual stock options so Brad what is the bottom line for you the individual investor today if you're not in the options Market probably not much and if you're not a professional investor probably not much so that's something to keep in mind you might hear a lot of discussion about witching the effect it has here but for most sort of long investors most everyday investors who have your money in your 41k and you're not doing a lot of individual day trading there's not necessarily going to be a big impact for for you all right no sorcery just portfolio and options strategy here thanks so much Julie appreciate it

Channel: Yahoo Finance

Views: 10,876

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market

Id: 1F5N8eRlEX0

Length: 3min 37sec (217 seconds)

Published: Sat Jun 22 2024