Stock market red on the day of the ‘quadruple witching hour’: Opportunities?

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European markets in red this Friday – Ibex 35 , CAC 40 , DAX …- after yesterday’s falls on Wall Street and this morning in Asian stocks.

Investors today will be on the lookout for what is known as the ‘quadruple witching hour’, ie the simultaneous expiry of equity and index futures and options, which often adds some additional volatility to the markets.

“This event usually greatly conditions the behavior of the cash market, drastically increasing trading volumes and their volatility,” they explain at Link Securities.

“When the quarterly expirations of futures and options contracts arrive, sudden price movements occur because investors decide whether to close their position or if they transfer it to the next expiration, which is called ‘rollover’, that is, there is a selling and buying pressure at the same time. For example, traders can decide to sell December 2021 and buy March 2022”, collects Admiral Markets.

“The market is usually very aware of which way investors are going, if the selling pressure exceeds the buying pressure, for example, since it is usually indicative of how the market is facing the quarter,” added the manager.

However, these analysts believe that “trying to draw conclusions from the real state of the stock markets on days like today is a mistake. We will, therefore, have to wait until next week, in which investors will have as their main reference the meeting of the Federal Open Market Committee of the Fed (FOMC), on the 20th and 21st, and the Monetary Policy Committee of the Bank of England (BoE), on Thursday 22, in order to determine the trend they adopt in the short term. We understand that what both central banks ‘do and say’ will be key in this regard”, they conclude.

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