Options expiration week happens each week, but it's the 3rd week of month that is most critical, and more importantly, the triple witching week which is most critical.
DEFINITION of 'Triple Witching'
An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.This phenomenon is sometimes referred to as "freaky Friday".
INVESTOPEDIA EXPLAINS 'Triple Witching'
The final trading hour for that Friday is the hour known as triple witching. The markets are quite volatile in this final hour, as traders quickly offset their option/futures orders before the closing bell. If you are a long-term investor, triple witching will have a minimal impact on you.Triple Witching months...
MARCH
JUNE
SEPTEMBER
DECEMBER
During the 3rd week of the month, stock prices tend to be drawn towards the largest open interest by expiration Friday.
In the case of TSLA, it was the $220 strike. Knowing this ahead of time is important, as you can plan accordingly.
However, analysts on TSLA had other plans in mind for this week...or did they?
Answer: Options Expiration week.
The $212.50 strike calls were $0.45 at the open.
They closed at $0.75 on Wednesday. Almost 100% return, not bad...
but, Thursday, 12/18, the stock jumped 6% to 218ish. Calls closed at $6.40!
a $450 investment from Wednesday's opening low, turned into $6,400, by closing bell, in just 2 days.
Happy Holidays!
tb
