Frequent readers have seen earlier posts where I have discussed option expiration week and the volatility that comes with it. But there was scant mention of option expiration at all this week. Options expired on Friday and the Dow Jones dropped 220 points.
Instead, we heard lots of “experts” speculating with reasons why the market might be falling. Most of what I heard this week was “blah, blah, blah.” I’ll say it again, the third week of the month (when options expire), we typically see more volatility in the markets. Write that down.
Now this past Friday (June 20, 2008), we had “quadruple witching.” This happens when when stock options, index options, index futures, and single stock futures all expire on the same day. “Quadruple witching” will happen again in September and December this year.
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