Double/triple witching

Double witching occurs when two classes of derivatives on the same underlying securities (which are themselves traded securities) expire on the same day: for example, when options on shares and index futures expire. Double witching causes volatility as traders close positions.

Triple witching occurs when three classes of derivatives on the same underlying expire on the same day.

Although "witching hours" (the period immediately before the derivatives expire) see greatly increased volatility it is short lived and the impact on the majority of investors is not significant. The volatility does matter to those who use strategies that are vulnerable to short term increases in volatility such as day traders and proprietary traders.

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