In the last decade, options trading is become popular among the general investing public. Options is a derivative contract that gives you the right but not the obligation to buy the underlying asset at a fixed price till a certain date.
Options contracts are now available on most of the stocks, commodities, currencies and other assets. You can even trade options on futures contracts. Now, most of the people trade stock options. When you trade stock options, you need to know a few dates that are popularly known as the Witching Dates.
Now options contracts are written for a specific period of time. All expire on the third Friday of the month of their expiry. Options contracts are available not only on stocks but also on futures. These options on futures expire on different dates. These dates are known as Double Witching Dates, Triple Witching Dates and Quadruple Witching Dates. So need to know what happens on these dates.
So what are Double Witching Dates? These dates are those when the two different options contracts on stock indexes, futures and stocks expire. It can be stock index options and stock options or stock options and options on stock index futures options. Similarly Triple Witching Dates are those when three different categories of options contracts expire on the same date. In the same way, Quadruple Witching Dates are those when four different categories of options contracts expire.
There is a difference between trading a stock options contract and the stock futures options contract. When trading the stock futures options contract, you need to know how to trade options in general coupled with the intricacies of trading that particular futures contract. A good example can be that of the S&P 500 futures options. This options contract is written on the S&P 500 stock index futures contract. Now, when you trade, the S&P 500 stock index futures, the value of the contract is obtained by multiplying the S&P 500 index value with $250. So, if the value of S&P 500 stock index is at 1,000 points, the value of the S&P 500 stock index futures contract will be $250,000.
So when you trade options you need to understand these options witching dates as they can affect your portfolio returns. Knowing these dates helps you to trade or not trade on that date keeping in view the options contract that you are trading.
Author Resource:-
Mr. Ahmad Hassam has done Masters from Harvard. Give 14 days RISK FREE Trial to Options University Trade Alert Service! Turn $200 into $100K in 3 months with this Penny Stock FREE Report!
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