📢 Quad witching. What is it? What to expect? How to trade it.

15 Sep 2023

First thing, it's actually triple-witching now. There used to be a 4th contract, but now there's only 3.

3 contracts expire on this day:

1. Index futures (S&P, Dow) contracts
   
2. Index options (i.e. SPX) contracts
   
3. Stock options (AAPLGOOGNVDA etc) contracts
   

• Single stock futures contracts. They don't exist anymore. That's why it's TRIPLE witching now.
  

This only happens in March, June, September, and December. The third Friday.

For example, when you buy "AAPL 100c 9/15/23", the date is the expiration. Only if it's ITM and you're holding before close, you will have to decide to KEEP your contracts, ROLL them over, or SELL them. If you KEEP, you'll get 100 shares per contract. Now imagine 3.4T worth of contracts having to go through that on the same day. Volatility.

1. There's 3.4T worth of contracts expiring tomorrow--- the highest ever in any September expiration, and the 6th largest ever.
   
2. 10 of the last 11 September witching, SPY finished red around -0.50%.
   
3. I calculated the range for SPY during the last 3 years of witching, it's around 6.5-7 points. The ATR for SPY for the last 60 days is 4.58 points.
   
4. The week after September witching tends to be a rollercoaster ride.
   
5. March 20, 2020 was a witching day (yes pandemic, but good to know)
   

So what should you do?

1. If you have no experience, do nothing.
   
2. If you're **day-trading**, take your gains quickly and don't expect a lot.
   
3. If you're adding to your swings, wait for good dips.
   
4. Expect the highest volatility around 2-4 PM.
   
5. Don't trade 0DTE. If you do, don't hold for glory. Lol.
   
6. Watch for impulsive moves causing SL raids
   
7. Watch the closely. It will be very telling since whales will be readjusting positions and possibly rolling/ reloading.
   
8. Expect volatility.
   
9. High volume on indices, major stocks, and further out option contracts (people rolling over their contracts)
   
10. Expect liquidity grabs, fake outs, etc.
    
11. If you don't trade it, enjoy the volatility.
    
12. Watch VIX (volatility index)
    
13. Don't go heavy on any positions.
    
14. Buy slow, don't chase, and ask questions if unsure.
    
15. Don't force trades. Don't FOMO buy. Don't chase. Don't get caught in the volatility.
    
16. Use support/ resistance/ supply/ demand zones. They work best on these days as they show liquidity grabs, fakeouts, etc.
    

Just looking out. Hope you benefitted. I'll be posting my trades in my community linked below. Welcome to come & follow.

15 Sep 2023

Catatan

Hope this prepared you for today's volatility. Thanks for reading and following!

18 Sep 2023

Catatan

We may still feel the after-effects of the large sum of money that was moved around on Friday. Keep your eyes open and don't think the worst has passed just yet. Trade safe.