Stocks rallied to record highs on Thursday ahead of one of Wall Street's scariest-sounding events, set for Friday: a triple witching.

"Triple witching" refers to the simultaneous expiration of 澳洲幸运5官方开奖结果体彩网:stock options, index options, and 澳洲幸运5官方开奖结果体彩网:index futures contracts. It occurs four times a year—on the third Fridays of March, June, September, and December—and c🅘an be known to trigger sharp price movements as traders close out or extend existing positions. 

Friday’s edition comes at a critical moment for the stock market. The S&P 500 closed at 澳洲幸运5官方开奖结果体彩网:an all-time high on Thursday as stocks rallied after the Federal Reserve on Wednesday 澳洲幸运5官方开奖结果体彩网:cut interest rates by half a percentage point. 

It was a bumpy ride to yesterday’s rate cut, with jitters about a 澳洲幸运5官方开奖结果体彩网:weakening labor market and stretched tech valuations contributing to 澳洲幸运5官方开奖结果体彩网:several big sell-offs in recent months. The 澳洲幸运5官方开奖结果体彩网:Cboe Volatility Index (VIX), or “fear gauge,” stood at about 16.5 on Thursday, down from spikes in early August and September but stillꦆ above its 2024 average.

What Triple-Witching Means for You

Triple-witching days often coincide, as is the case Friday, with S&P 澳洲幸运5官方开奖结果体彩网:index rebalancing, which generates additional trading volume and can contribute to volatility. Palantir (PLTR) and Dell (DELL) will join the benchmark S&P 500 after Friday's close; so will insurance company Erie Indemnity (ERIE). Those stocks and the ones they're replacing—American Air Lines (AAL), Etsy (ETSY), and Bio-Rad Laboratories (BIO)—could see high volume on Friday as funds tracking the index buy and sell shares.

But for the majority of long-term buy-a꧟nd-hold investors, the volatility exhibited on triple-witching days shouldn’t be ominous. Unusual price movements are often short-lived and, because investors know triple-witching is happening, turbulence is unlikely to materially change market sentiment.

Triple-witching is of greatest concern to active traders whose 澳洲幸运5官方开奖结果体彩网:derivatives are expiring. The last hour of the session, the 澳洲幸运5官方开奖结果体彩网:triple-witching hour, brings a flurry of activity that can affect 澳洲幸运5官方开奖结果体彩网:liquidity. Sometimes the dynamics of triple-witching result in a less liquid market for a certain security, which increases spreads and creates opportunities for 澳洲幸运5官方开奖结果体彩网:arbitrageꦇ, in which a trader exploits price differentials between markets.