Welcome to Extreme Investor Network, where we provide you with the latest insights and information on trading in the stock market. Today, we are diving into the concept of triple witching expiration, a term that may sound complex but holds significant importance in the world of trading.
Triple witching expiration refers to the quarterly expiration of single stock and index options, as well as index futures. On these days, which are among the most actively traded sessions of the year, traders and investors closely monitor market movements and make strategic decisions based on various factors.
Interestingly, the current backdrop of the market adds an extra layer of intrigue to this triple witching expiration. The S & P 500 is at an all-time high, which typically brings joy to bullish investors and discomfort to bears. As Chris Murphy from Susquehanna points out, the current market conditions, with most puts being deep out of the money and calls in the money, may lead to significant impact if a sell-off occurs.
But what happens after the triple witching expiration? Historically, the week following the September expiration has been weak, with average losses for the Dow Industrials, S & P 500, and Nasdaq since 1990. This trend is often attributed to end-of-Q3 portfolio restructuring as managers adjust their holdings for the upcoming quarter.
In addition to these market dynamics, today marks the S & P 500 rebalancing, with three new entrants entering the index. This inclusion effect, where stocks experience a boost in performance upon being included in the index, is evident with Dell and Palantir seeing significant gains since the announcement.
As the S & P 500 reaches new highs, attention is also shifting towards the Russell 2000 smallcap index, which is not far behind in its climb towards a 52-week high. A breakout in the Russell 2000 would further fuel bullish sentiment and add to the narrative of a broadening market rally.
Stay tuned to Extreme Investor Network for more market insights and updates that will help you navigate the world of trading with confidence. With our unique analysis and expert opinions, we aim to empower investors like you to make informed decisions and maximize your trading potential.