Triple witching hour is the last hour of the stock market trading session (3:00-4:00 P.M., New York City local Time) on the third Friday of every March, June, September, and December. Those days are the expiration of three kinds of securities:
The simultaneous expirations generally increases the trading volume of options, futures, and their underlying stocks, occasionally increasing the volatility of prices of related securities.
On those same days single-stock futures also expire, so that the final hour is sometimes referred to as the quadruple witching hour.
The term "triple witching" refers to the extra volatility resulting from the expiration dates of the three financing instruments, and is based on the witching hour denoting the active time for witches.
It is used often and is considered industry jargon, along with the synonym, Freaky Friday.
This daylong event, which is sometimes referred to as “Freaky Friday,” is an important day for short-term investors because the markets tend to be turbulent and unpredictable, shifting erratically as traders attempt to offset their orders before the closing bell rings.
A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.
Australian Securities Exchange Ltd is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange. It was formed on 1 April 1987, through incorporation under legislation of the Australian Parliament as an amalgamation of the six state securities exchanges, and merged with the Sydney Futures Exchange in 2006.
In finance, a futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other. The asset transacted is usually a commodity or financial instrument. The predetermined price the parties agree to buy and sell the asset for is known as the forward price. The specified time in the future—which is when delivery and payment occur—is known as the delivery date. Because it is a function of an underlying asset, a futures contract is a derivative product.
In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model, will return a theoretical value equal to the current market price of said option. A non-option financial instrument that has embedded optionality, such as an interest rate cap, can also have an implied volatility. Implied volatility, a forward-looking and subjective measure, differs from historical volatility because the latter is calculated from known past returns of a security. To understand where implied volatility stands in terms of the underlying, implied volatility rank is used to understand its implied volatility from a one-year high and low IV.
Black Monday is the name commonly given to the global, sudden, severe, and largely unexpected stock market crash on October 19, 1987. In Australia and New Zealand, the day is also referred to as Black Tuesday because of the time zone difference from other English-speaking countries. All of the twenty-three major world markets experienced a sharp decline in October 1987. When measured in United States dollars, eight markets declined by 20 to 29%, three by 30 to 39%, and three by more than 40%. The least affected was Austria while the most affected was Hong Kong with a drop of 45.8%. Out of twenty-three major industrial countries, nineteen had a decline greater than 20%. Worldwide losses were estimated at US$1.71 trillion. The severity of the crash sparked fears of extended economic instability or even a reprise of the Great Depression.
National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra. It is under the ownership of some leading financial institutions, banks, and insurance companies. NSE was established in 1992 as the first dematerialized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system that offered easy trading facilities to investors spread across the length and breadth of the country. Vikram Limaye is the Managing Director and Chief Executive Officer of NSE.
An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the day on stock exchanges while mutual funds are bought and sold from the issuer based on their price at day's end. An ETF holds assets such as stocks, bonds, currencies, futures contracts, and/or commodities such as gold bars, and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur. Most ETFs are index funds: that is, they hold the same securities in the same proportions as a certain stock market index or bond market index. The most popular ETFs in the U.S. replicate the S&P 500 Index, the total market index, the NASDAQ-100 index, the price of gold, the "growth" stocks in the Russell 1000 Index, or the index of the largest technology companies. With the exception of non-transparent actively managed ETFs, in most cases, the list of stocks that each ETF owns, as well as their weightings, is posted daily on the website of the issuer. The largest ETFs have annual fees of 0.03% of the amount invested, or even lower, although specialty ETFs can have annual fees well in excess of 1% of the amount invested. These fees are paid to the ETF issuer out of dividends received from the underlying holdings or from selling assets.
Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter that is needed to be modified for the Black–Scholes formula to fit market prices. In particular for a given expiration, options whose strike price differs substantially from the underlying asset's price command higher prices than what is suggested by standard option pricing models. These options are said to be either deep in-the-money or out-of-the-money.
VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
Euronext Paris is France's securities market, formerly known as the Paris Bourse, which merged with the Amsterdam, Lisbon, and Brussels exchanges in September 2000 to form Euronext NV, which is the second largest exchange in Europe behind the United Kingdom's London Stock Exchange Group. As of 2019, the over 846 companies listed had a combined market capitalization of US $3.5 trillion.
In finance, a calendar spread is a spread trade involving the simultaneous purchase of futures or options expiring on a particular date and the sale of the same instrument expiring on another date. These individual purchases, known as the legs of the spread, vary only in expiration date; they are based on the same underlying market and strike price.
The backspread is the converse strategy to the ratio spread and is also known as reverse ratio spread. Using calls, a bullish strategy known as the call backspread can be constructed and with puts, a strategy known as the put backspread can be constructed.
Freaky Friday is a 1972 children's book by Mary Rodgers.
Pin risk occurs when the market price of the underlier of an option contract at the time of the contract's expiration is close to the option's strike price. In this situation, the underlier is said to have pinned. The risk to the writer (seller) of the option is that they cannot predict with certainty whether the option will be exercised or not. So the writer cannot hedge his position precisely and may end up with a loss or gain. There is a chance that the price of the underlier may move adversely, resulting in an unanticipated loss to the writer. In other words, an option position may result in a large, undesired risky position in the underlier immediately after expiration, regardless of the actions of the writer.
In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset value, time until expiration, market volatility, and other factors. Options may be traded between private parties in over-the-counter (OTC) transactions, or they may be exchange-traded in live, orderly markets in the form of standardized contracts.
In finance, a stock market index future is a cash-settled futures contract on the value of a particular stock market index. The turnover for the global market in exchange-traded equity index futures is notionally valued, for 2008, by the Bank for International Settlements at US$130 trillion.
IVX is a volatility index providing an intraday, VIX-like measure for any of US securities and exchange traded instruments. IVX is the abbreviation of Implied Volatility Index and is a popular measure of the implied volatility of each individual stock. IVX represents the cost level of the options for a particular security and comparing to its historical levels one can see whether IVX is high or low and thus whether options are more expensive or cheaper. IVX values can be compared for the stocks within one industry to find names which significantly differ from what is observed in overall sector.
Nasdaq OMX Alpha Indexes measure the relative performance of an underlying stock or exchange-traded fund (ETF) against another benchmark ETF using a proprietary calculation. The first component in the index is the “Target Component”, such as Apple (AAPL), and the second component is identified as a “Benchmark Component”, such as the S&P 500 ETF (SPY).
Following is a glossary of stock market terms.
In folklore, the witching hour or devil's hour is a time of night that is associated with supernatural events, whereby witches, demons and ghosts are thought to appear and be at their most powerful. Definitions vary, and include the hour immediately after midnight, and the time between 3:00 am and 4:00 am.