Options trading is one of the ways to profit from the volatility in stocks. Options contracts give you the right but not the obligation to buy or sell the underlying stocks before a certain date. So instead of directly investing in those stocks, you can invest in options and build a much larger portfolio with the same investment.
Options get effected by volatility in the market as well as the time. You need to know certain dates that are very important if you are seriously into stock options. These dates are known as the Witching Dates. Now many people trade stocks. For them stock options should not be new. They can invest in stock options. However,stock options are a bit tricky.
All stock options contracts expire on the third Friday of each month. Options on futures expire on different dates depending on the contract. Sometimes, different classes of options expire on the same date. These dates are known as the Double, Triple and Quadruple Witching Dates.
Now options contracts are written for a specific period of time. All expire on the third Friday of the month of their expiry. Options contracts are available not only on stocks but also on futures. These options on futures expire on different dates. These dates are known as Double Witching Dates, Triple Witching Dates and Quadruple Witching Dates. So need to know what happens on these dates.
So what are Double Witching Dates? These dates are those when the two different options contracts on stock indexes, futures and stocks expire. It can be stock index options and stock options or stock options and options on stock index futures options. Similarly Triple Witching Dates are those when three different categories of options contracts expire on the same date. In the same way, Quadruple Witching Dates are those when four different categories of options contracts expire.
Now stock options and stock index futures options are different contracts. You need to understand the difference between them. Now when you trade a stock index futures options contract, you need to first master trading that stock index futures contract.
So when you trade options you need to understand these options witching dates as they can affect your portfolio returns. Knowing these dates helps you to trade or not trade on that date keeping in view the options contract that you are trading.
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There’s a lot of money to be made trading at expirations. Stock prices, for instance, will often gravitate towards the strike price with the most open interest. This works more for stocks with a lot of option trading activity. This is know as pinning the strike, or stock pinning. If you know what to look for, you can use this phenomenon to make quick money at options expiration.
That was a tremendous article. I don’t agree with every single thing that you said but still great nonetheless. On a side note, I am so happy that the NFL is back. It seems like I been waiting forever. This has to be my favorite time of the year. Sorry, I’m rambling. lol
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You are most welcome.
I really appreciate this post. We have to have additional individuals like you bringing value for the community. Can I put this post on my blog? I’d give you credit and link back of course.
You may