What is Four Witches Day?？

In fact, four witch days is not a bad omen, but there are four types of financial derivatives will be settled on the same day, so it is called four witch days.。It is also because many investors need to rush to settle their investments in financial derivatives on the same day, so there will be a lot of buying and selling actions in the U.S. stock market, which in turn promotes market trading volume, so the trading volume on the day of the four witchday is usually much higher than usual.。

In addition, due to the large increase in trading volume during the four witch days, the price balance in the natural market will fail in a short period of time, resulting in a certain degree of volatility in the price of U.S. stocks.。

When will the date of the Fourth Witch Day in 2024 fall?？

There are four four witch days in a year, all on the third Friday of March, June, September and December.。The four witch days in 2024 are as follows:

March 15 (Friday), June 21 (Friday), September 20 (Friday), December 20 (Friday)

It is important to note that futures and options on stock indices are settled once on the third Friday of each month, while individual stock futures and options are settled only four times a year.。

As a result, there are four settlement days in a year for four categories of financial commodities, the third Friday of March, June, September and December.。On the day of the settlement date, the investor will need to close the position, or transfer the position to extend the maturity date, otherwise he will be forced to close the position.。

What financial derivatives are settled on four witch days.？

Financial derivatives, mainly futures and options, settled at the expiration of the four witch days include:

• stock index futures
• Stock Index Options
• individual stock futures
• individual stock option

For example, equity index futures and options include futures and options on the S & P 500 Index (S & P 500 Index) and the Dow Jones Index (Dow Jones Index), while individual stock options and futures are U.S. stock options and futures。

Why these derivatives need to be settled？

If you don't know anything about futures and options, you may wonder why these derivatives need to be settled.？So, let's take you through the concepts of futures and options so that you can understand the concept of settlement and then get a deeper understanding of why the four witch days are happening.。

Futures

In the beginning, futures were primarily used to reduce risk among buyers and sellers of agricultural products。It is more difficult to predict the production results of crops early on because there are uncontrollable factors such as weather, which can make it difficult to predict product prices, making it difficult for buyers and sellers to control costs and revenues.。

Futures refer to future trading.。Buyers and sellers enter into futures contracts that will be traded at a price and quantity acceptable to both parties at a specific point in the future, with each party paying a further margin as security。As the financial markets became more sophisticated, people began to securitize the futures contracts in their hands, which became the futures contracts seen in the current market.。

• What happens when it expires on the settlement date？

Commodity futures are a promise that at a specific point in the future, both parties will need to make physical delivery, that is, one-handed delivery.。

When these futures expire, they will be settled by cash payment.。

Similar to stocks, there are many traders in the market who trade futures in order to earn a spread when buying and selling this contract, but they differ from stocks in that they have a time limit for settlement at maturity, so investors need to rush to close their positions when the settlement date expires.。

This is what leads to intense trading activity in the market on four witch days, as many investors will rush to close their positions at the last minute.。

Closing positions

When trading futures, you can choose to buy or sell specific futures。Once the settlement date is reached, you need to close out your position, fill out the original buy and sell futures, that is, close out your position。

Option

Options, like futures, are financial derivatives that allow buyers and sellers to trade a particular investment asset at an agreed price at some point in the future.。Note that the deposit you paid cannot be retrieved whether you end up buying it or not。

Although the option looks very similar to the futures, the margin required to be placed in the futures is a chance to get it back, but the deposit on the option is not recoverable。

In addition, after the futures expire, the buyer and seller must close the position, but the buyer in the option decides whether to buy or not, so there is no so-called closing pressure.。However, the option seller may have the need to close the position。

Two Characteristics of the Four Witch Days

Large trading volume

The market will be very active on Four Witches Day, many people will close their positions, and their buy and sell actions will naturally result in large volumes in the market。

Arbitrage opportunities emerge

Due to the large volume of trading on the day, many investors rush to close their positions and prices will be more volatile。As a result, there are also many equity investors, waiting for the opportunity to arbitrage, but not ruling out the possibility of a loss。

Should four witch days adjust the portfolio?？

Long-term investors

For long-term investors, you don't really need to be concerned about short-term price movements, especially the kind of adjustment activity that occurs every three months, such as Siwu Day.。What's more, you should be clear about your initial investment intentions so that you don't give up on your long-term investment plan because of a momentary change.。

short-term investors

If you're a short-term investor, the dramatic volatility that four witch days bring to the market is exactly the opportunity you're after.。However, you also need to practice the basic skills of short-term investing so that you can win more and lose less when the opportunity comes.。

FAQs

What is four hours?？

The last trading hour of the day, also known as the Quadruple Wtiching Hour, is between 3 p.m. and 4 p.m. Eastern Time.。

What is Sanwu Day?？

Prior to November 8, 2002, there was no individual stock futures in the U.S. stock market, so it was called Sanwu Day at the time, and it was not until the beginning of trading in individual stock futures that it was changed to the current Siwu Day.。