Witching Hour

AAA

DEFINITION of 'Witching Hour'

The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled by large professional traders, program traders and large institutional traders, and can be characterized by higher-than-average volatility.

INVESTOPEDIA EXPLAINS 'Witching Hour'

The witching hour is most commonly known in the context of triple witching, which is the third Friday of every quarter, when stock index options, stock options and stock index futures expire and roll to the next series. The last hour of these Fridays can be very volatile as positions are adjusted or closed out in anticipation of expiration. Since single stock index options now expire on the same day, triple witching and quadruple witching are used somewhat interchangeably.

RELATED TERMS
  1. Double Witching

    Similar to triple witching, but instead of three classes of options ...
  2. Quadruple Witching

    The expiration date of various stock index futures, stock index ...
  3. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  4. Index Futures

    A futures contract on a stock or financial index. For each index ...
  5. Index Option

    A financial derivative that gives the holder the right, but not ...
  6. Triple Witching

    An event that occurs when the contracts for stock index futures, ...
RELATED FAQS
  1. What does "after the bell" mean?

    " After the bell" is financial slang for activity occurring after the close of the stock market, including after-hours trading, ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Introduction To Single Stock Futures

    These contracts allow for easier shorting, and provide more leverage and flexibility than stocks.
  2. Options & Futures

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  3. Options & Futures

    Stock Option Expiration Cycles

    Understanding expiration cycles is just one more way to help you increase your success rate when trading options.
  4. Options & Futures

    Trade Covered Calls On High Dividend Paying Stocks

    We explain the risks, rewards, timing, and profit and loss considerations for covered calls with dividend stocks.
  5. Options & Futures

    Was Buffet Right about Derivatives as WMDs?

    Why Warren Buffet described derivatives as weapons of mass destruction, and when can they be helpful or harmful?
  6. Options & Futures

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  7. Options & Futures

    Advantages Of Trading Futures Over Stocks

    We look at the top eight advantages of trading futures over stocks.
  8. Mutual Funds & ETFs

    Which ETF is the Best Bet: VTI or IWV?

    A look at two quality ETFs that offer diversification, low expense ratios, and exposure to the total market.
  9. Options & Futures

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.
  10. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center