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Since the S&P index futures began trading on April 21,
1982, stock options, index options as well as index futures all expire at the
same time four times each year—known as Triple Witching. Some call it Quadruple
Witching or Quad Witch due to single-stock and ETF futures, their impact on the
market has thus far been subdued.
Monday Before September Triple Witching is less bearish with
DJIA and S&P flat on average, but NASDAQ is down 14 of last 23 with and
average loss of -0.25%. September’s option expiration week is up 57.5% of the
time for S&P 500 since 1982. DJIA and NASDAQ have slightly weaker track
records with gains 52.5% of the time and 55.0% of the time respectively.
However, the week has suffered several sizable losses. The
worst loss followed the September 11 terrorist attacks in 2001. In the last nineteen
years, S&P 500 and NASDAQ are tied for best record during September’s
option expiration week, up thirteen times, but NASDAQ is down the last four.
Friday had been firm with all three indices advancing every year 2004 to 2011,
but S&P 500 has been down nine of the last ten since.
S&P 500 Down 25 of 32 Week
After September Quarterly Options Expiration, Average Loss 0.89%
The week after September options expiration week, has a
dreadful history of declines most notably since 1990. The week after September
quarterly options expiration week has been a nearly constant source of pain
with only a few meaningful exceptions over the past 32 years. Substantial and
across the board gains have occurred just four times: 1998, 2001, 2010 and 2016
while many more weeks were hit with sizable losses.
Full stats are the sea-of-red in the tables here. Average
losses since 1990 are even worse; DJIA –0.98%, S&P 500 –0.89%, NASDAQ –0.85%.
End-of-Q3 portfolio restructuring is the most likely explanation for this trend
as managers trim summer holdings and position for the fourth quarter.
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Image and article originally from jeffhirsch.tumblr.com. Read the original article here.