The stock market was extremely volatile last week, but do you know that it was due to an event called “Quadruple Witching”? This is an event which occurs four times a year on the third Friday of March, June, September, and December. Last Friday was the third Friday of September, it was a day on which four derivatives contracts expire simultaneously, namely:

• Stock index futures
• Stock index options
• Stock options, and
• Single stock futures

If you are not familiar with options and futures, you can read my two recent articles below. Additional Readings:

• How to Hedge Your Stock Portfolio Risks Using Futures Contracts
• How to Increase Your Stock Portfolio Return With Option Strategies

The expiry of the contracts typically creates heavy trading volume because investors and traders need to offset existing futures and options contracts that are profitable. But interestingly, the market seems to have a high probability of directional shift after the Quadruple Witching event....