## Why Do US Stocks Experience Abnormal Volatility on Certain Dates? Market Control Logic from Quadruple Witching

Every year, there are four specific times when investors become particularly nervous — these are known as the quadruple witching days. But many people are actually unclear about why these four days become "abnormal days" for the market. The reason behind this is not fundamental changes, but the concentrated settlement of derivative financial products.

## The Core Mechanism of Quadruple Witching: The Tug of War Between Futures, Options, and Spot Prices

The so-called quadruple witching refers to the four days each year in the US when stock futures, stock options, stock index futures, and stock index options all settle simultaneously. During settlement, the prices of futures must converge with the spot prices, as if an invisible force is pulling the two closer — this is the source of the "witching power."

Since settlement occurs once per quarter, there are four such days annually, falling on the third Friday of March, June, September, and December. The 2024 quadruple witching days are:

- Q1: March 15
- Q2: June 21
- Q3: September 20
- Q4: December 20

## Why Is Trading So Volatile on These Days?

On quadruple witching days, three phenomena tend to occur: trading volume surges, the VIX (fear index) rises, and prices become severely disconnected from fundamentals. According to statistical data, because US stocks have been in a long-term bullish trend, market makers tend to coordinate to push stock prices higher before these days, allowing derivatives to settle at higher prices. However, among these artificially inflated stocks, 88% decline within the following week, with the S&P 500 averaging a drop of 1.2%.

The underlying logic behind this phenomenon is straightforward: market makers (usually the sellers of futures or options) expect prices to rise, but if the increase is insufficient at expiration, they will incur losses. To hedge against this risk, they push the stock prices higher through large-volume trading before settlement, making the settlement prices more favorable. But this non-fundamental-driven rise is often unsustainable. Once settlement is complete, investors start taking profits, and stock prices fall back.

## What Does This Mean for Different Types of Investors?

**Long-term investors** can generally ignore the volatility around quadruple witching days. Stock prices will ultimately revert to fundamentals, and short-term abnormal fluctuations will not change the actual value of the companies.

**Short-term traders**, however, need to pay close attention. The volatility during the week before and after these days tends to increase significantly. This can be an opportunity for "oversold rebounds" to go long, or "overbought pullbacks" to short. But the premise is that these price movements are purely driven by market sentiment, unrelated to fundamentals, so they are only suitable for short-term operations. If you misjudge the direction, do not hold onto losing positions; strict stop-loss discipline is essential.

## Are the 2024 Quadruple Witching Days Worth Watching?

Currently, the US stock market benefits from AI themes, and the market remains in a bullish pattern. Based on historical patterns, bullish years tend to see the quadruple witching days trending higher, while bearish years tend to trend lower. As long as there are no major reversals, the upcoming quadruple witching days are expected to continue this trend.

A special reminder: if investors participate in the market through futures or options, they must proactively roll over positions as settlement dates approach. Near expiration, liquidity is poor, transaction costs increase, and rollover costs further add to the burden.