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Quadruple witching refers to the third Friday of every March, June, September and December. On these days, market index futures, market index options, stock options and stock futures expire, usually resulting in increased volatility.
How It Works/Example:
Although index futures and options generally share simultaneous expirations on the third Friday of every month, quadruple witching days only occur four times a year. The last hour of these trading days, from 3:00 to 4:00 p.m. EST, is referred to as the quadruple witching hour.
On quadruple witching days, and especially during quadruple witching hours, many investors attempt to unwind their futures and options positions before the contracts expire. This activity frequently includes repurchasing contracts and closing out position hedges.
Why It Matters:
Quadruple witching days are usually accompanied by considerable volatility in stock and derivative prices, as well as increased trading volume. As a result, investors can anticipate and plan for the potential effects of these relatively turbulent trading days.
A coupon bond, frequently referred to as a bearer bond, is a bond with a certificate that has small detachable coupons. The coupons entitle the holder to interest payments from the borrower. Coupon bonds are rare today because most bonds are not issued in certificate form; rather, they are registered electronically (although some bondholders still choose to hold paper certificates). Thus, these days the term coupon refers to the rate of interest on a bond rather than the physical nature of the certificate.
In the 1980s, some financial institutions began purchasing coupon bonds and selling the coupons as separate securities, called strips.
