Anyone who turned on CNBC this morning undoubtedly heard the talking heads clamoring over the “Quadruple Witching” day that was sure to bring wild swings and volatility galore. The name refers to the fact that four types of options were set to expire on Friday: stock-index futures, stock-index options, stock options and single stock futures. When futures contracts expire it is the final opportunity for the option holder to buy or sell (in the case of a call or put contract) otherwise known as taking delivery. The conventional wisdom holds that this sort of activity will boost market volume well above normal levels which will in turn intensify market volatility.
In reality, the “Quadruple Witching” day looked more like an average Friday with the market largely undecided of which direction to head. All major US equity indexes finished the day higher but not by much. There was not much volatility even though the NASDAQ (for example) crossed the breakeven line no less than 13 times. This market may have been manic about its direction, but it was nothing worth of getting worked up over. Advancers outpaced decliners by 7 to 6 on the NYSE, and volume was health yet not extreme.
ETNs charged with tracking volatility through the VIX (VXX, VXZ) both fell slightly today. It looks like CNBC just really needed something, anything to talk about this morning in the absence of major economic data or earnings releases of consequence this morning. It is too bad for them that this story did not end up holding water. These days, options traders often exercise well in advance of expiration. Hopefully, this will start to dim the legend of these so-called witching days.
For the week, stocks finished with another nice weekly gain. It seems that the summer doldrums trumped the “witching” this time. Have a great weekend everybody, but perhaps most everyone has already started theirs!
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