Witching Hour

The term "Witching Hour" refers to the last hour of trading on the third Friday of every month, when stock index futures, stock options, and other derivatives expire. This time period is often marked by high volatility and trading volume, as investors seek to close out their positions before the contracts expire.

The term "Witching Hour" is thought to have originated in the 1980s, when traders noticed that the market tended to be more volatile during the last hour of trading on the third Friday of each month. This volatility is caused by a number of factors, including the fact that many investors are forced to close out their positions before the contracts expire, and the fact that there is often a lot of uncertainty about the market's direction at this time.

The Witching Hour can be a challenging time for investors, as it can be difficult to predict how the market will behave. However, it can also be a time of opportunity, as investors who are able to navigate the volatility can potentially make significant profits.

Here are some of the factors that contribute to the volatility of the Witching Hour:

• The need to close out positions. Many investors are required to close out their positions in stock index futures and options before the contracts expire. This can create a sudden influx of selling pressure, which can drive prices down.
• Uncertainty about the market's direction. The Witching Hour often occurs at a time when the market is already volatile, and there is often a lot of uncertainty about the market's direction. This uncertainty can lead to even more volatility, as investors try to guess which way the market is going to move.
• Increased trading volume. The Witching Hour is often a time of increased trading volume, as investors try to buy and sell contracts before they expire. This increased volume can also contribute to volatility, as it can make it more difficult for investors to find buyers or sellers for their positions.

The Witching Hour can be a challenging time for investors, but it can also be a time of opportunity. If you are considering trading during the Witching Hour, it is important to be aware of the risks involved and to have a plan in place.