How To Trade Today's Options Expiration Quadwitching

Benzinga

What Is Quadruple Witching?  The term quadruple witching refers to the simultaneous expiration four times a year of stock options, index futures, and index futures options derivatives contracts. The fourth type of contract involved in quadruple witching, single-stock futures, hasn't traded in the U.S. since 2020 and was never a major contributor to equity trading volumes.What is now effectively "triple witching" occurs on the third Friday of March, June, September, and December. Equity trading volume tends to rise on these days and is typically heaviest during the last hour of trading as traders adjust their portfolios.  #1 Morning Stock Show To Get You Ready For The Stock Market Open, PreMarket Gainers, Earnings This Week, Economic Data & More!  Benzinga PreMarket Prep 8:00AM ET- 9:00AM ET BenzingaTV on YouTube.

Transcript

00:00 Let's take a look.

00:00 I always wanna learn a little bit more

00:03 about this situation.

00:04 Arm is an amazing situation,

00:06 but the quad witch arrival today, Joel,

00:09 and I never do well on these days.

00:13 I don't know how to find the edge in the quad witch.

00:16 What should we be looking for today?

00:18 - It's really more the buildup,

00:20 really the buildup going into it than anything else, right?

00:23 Because the, you know, the jockeying for position,

00:27 I wasn't here last week, but the rollover the week before,

00:32 give some volatility and you had that

00:34 if they roll over from the contracts.

00:37 I think that, you know, the biggest thing

00:39 is the opening imbalances and, you know,

00:43 way to catch the extremes.

00:45 Now, Dennis, you said that they flip a lot today,

00:48 but it's really more the buildup

00:51 and, you know, for this opening print.

00:54 And then I think the close probably

00:56 has a little bit more significance too.

00:58 It's the actual, you know, where people are marked,

01:01 but, you know, I think a lot's about,

01:02 I mean, they say $4 trillion is coming off the table.

01:06 I mean, that's a lot of money,

01:07 but it seems like it's old people short

01:10 trying to cover the way we've traded the last couple of days.

01:13 - Trying to predict the moves ahead of time

01:15 on these option expirations is not the way to play it.

01:18 Like as a trader, it's to fade the extreme.

01:22 So if we have some extreme movement off the open,

01:25 meaning a stock opens up really high on no news

01:28 or a stock opens down really low on no news,

01:31 those are often phased

01:32 because those are done for order flow reasons.

01:34 What I've always taught on,

01:36 especially on the third Fridays of the month

01:38 is sometimes you have this options,

01:40 you have institutional money coming in,

01:42 big player jockeying against their open stock positions.

01:45 And that's not done on any fundamental.

01:47 So it's just done for order flow reasons

01:48 and order flow move reasons often retrace, they often do.

01:52 So not all the time, nothing's 100% of the time,

01:55 but if it works 55% of the time, I'll make money from it.

01:58 So I just basically am a fader always on options expiration.

02:02 So this is the third Friday, I'll be fading crazy opens.

02:05 I will also be fading crazy closes,

02:07 meaning just going against the stock gaps up,

02:10 I'm short, stock gaps down, I'm long.

02:12 Again, trying to avoid news stocks

02:14 because those are more trendy.

02:16 You know, you get a stock gap and down on news,

02:18 it can continue because you may even punish people

02:21 who are playing that strategy, they didn't catch the news.

02:23 So you gotta be careful just watching on the news.

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