Quadruple Witching Brings Heightened Volumes, Volatility

Updated Sept. 20, 2019 4:45 pm ET

Stock volatility jumped this week, with turbulence heightened on Friday as a flurry of derivatives expired. The Cboe Volatility Index, or VIX, rose Friday, gaining about 9% as the S&P 500 ticked down to end the week. The options-based gauge traded at

Cboe Global Markets Inc.

tends to fall when the S&P 500 is rising, and vice versa.

Friday is so-called quadruple witching, which occurs four times a year and refers to the day that options and futures on both indexes and stocks expire at the same time. Some investors and analysts say the simultaneous expiration can spur greater volatility in markets as volumes pick up. The day tends to boost trading activity because investors readjust expiring positions. Investors sometimes choose to roll over their positions so that they expire later in time or close them entirely. Options give investors the right to buy or sell shares of stock at a specific price, later in time. Calls confer the right to buy, while puts give the right to sell. “There’s often increased volume and volatility,” said Elisabeth Kashner, director of ETF research and analytics at

FactSet
.

A number of indexes, including the S&P 500, S&P 400 and S&P 600, were scheduled to rebalance Friday, another factor that was expected to drive higher trading volumes.

Traders in the Cboe Volatility Index (VIX) pit last year. The volatility measure increased on Friday.

Photo:

Daniel Acker/Bloomberg News

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

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