"Three Witches Day" Trading Event Analysis: How Record-Breaking Contract Size Drives Market Volatility

The multiple “Triple Witching” events each year are a focal point for financial markets. These cyclical events involve large-scale expirations of derivatives, often triggering intense market volatility. The most recent Triple Witching saw a record-breaking $6.5 trillion in contracts expiring, an unprecedented scale. Coupled with heightened global tensions and other factors, this is expected to significantly increase market trading activity and volatility.

What is Triple Witching? A Cyclical Event in Financial Markets

“Triple Witching” is defined as the important financial event occurring on the third Friday of March, June, September, and December each year. This event involves the simultaneous expiration of three main types of derivatives: stock options, stock index futures, and stock index options, hence the name.

Since the 1980s, this phenomenon has been likened to a mysterious “witching hour” due to its unique market activity characteristics. Particularly in the last hour before trading ends, market participants refer to it as the “Triple Witching Hour,” when trading volume and price swings tend to be most intense. In the past, single stock futures also expired, creating “Quadruple Witching,” but since 2020, the US has ceased trading such futures contracts.

Triple Witching typically leads to a surge in trading volume and price fluctuations, especially impacting stocks with large derivatives trading volumes and relatively low market capitalization. In recent years, as the expiration times of options have gradually dispersed, the influence of Triple Witching has weakened. However, during periods of low liquidity and unstable market sentiment, its impact remains significant.

Record-breaking Contract Expiration Scale and Market Impact

This Triple Witching has set a new record for the scale of expiring contracts. According to Bloomberg, contracts with a nominal value of $6.5 trillion will expire during this period, breaking previous records. According to Investopedia, the trading volume on the 2019 Triple Witching reached $6 trillion, with a record trading volume of 10.8 billion shares, far exceeding the average of 7.5 billion shares.

If history repeats itself, such a massive scale of contracts could amplify market activity and potentially cause significant turbulence. This scale effect not only impacts liquidity in the stock market but also can trigger chain reactions affecting other asset classes.

How Wall Street Analysts View Market Volatility Expectations

For this Triple Witching, market analysts generally expect volatility to increase significantly. Research firm Asym 500 offers an interesting perspective, suggesting that since May, intraday volatility in US stocks has been relatively moderate. This “anchoring effect” is attributed to a large number of investors engaging in put options trading early in 2025, causing the S&P 500 index to tend to converge near high-volume strike prices.

MarketWatch’s analysis indicates that the $6.5 trillion in expiring contracts could create a “complex market environment,” making stocks prone to larger swings. This aligns with historical trends, as a 2021 analysis report on Nasdaq also pointed out that Triple Witching often triggers intense price fluctuations.

Research from FXStreet found that the average return on Triple Witching days is about -0.72%, lower than usual, suggesting a bearish tendency in trading toward the close. However, according to AInvest’s historical data, the main indices have a roughly 60% chance of positive returns on Triple Witching days, though this probability varies from year to year and is not a fixed rule.

Cryptocurrency Market’s Sensitive Response to Triple Witching

While Triple Witching mainly impacts traditional stock markets, cryptocurrencies like Bitcoin and Ethereum have recently shown a high correlation with stock market movements. When traditional markets experience increased trading volume and heightened price swings, these spillover effects often lead to correlated volatility in the crypto markets.

Currently, Bitcoin is trading near $90.16K, with a 24-hour change of +1.07%, and a 24-hour trading volume of $1.36B. Although there are no large-scale expiration events for crypto options (such as Bitcoin options) during this Triple Witching, historical precedents from 2019 suggest that the intense market volatility triggered by Triple Witching can directly impact cryptocurrency price trends.

Investors should anticipate potential market fluctuations and consider risk management strategies such as diversification, setting stop-loss orders, and dynamically adjusting positions. Whether in traditional finance or crypto markets, prudent risk management during high-volatility events like Triple Witching is often key to protecting investment portfolios.