Witching Hour

Wall Street has four witches: stock options, stock index options, stock index futures and single stock futures. Four times a year, these contracts expire on the same day – a market event that’s called quad-witching. 

What makes it ‘witchy’ is the higher trading volume and extra volatility that comes from rolled over positions and unwinding hedges. It’s often felt most in the last hour of trade, dubbed the ‘witching hour.’

But last Friday’s US$7T quad-witching was eerily quiet. Instead, the wild session came on Monday with the S&P 500 gaining 1.5% and the Nasdaq closing 2% higher at a new record. And Meta’s ($META) early success with its Muse agent was likely the driving force behind the broader tech rally.

Chip stocks roared back to life with AMD ($AMD) closing above US$1T for the first time. Intel ($INTC) gained 12%, while ARM ($ARM) soared 17% in a single-day. And in an unusual turn of events, software didn’t move against semiconductors: AppLovin ($APP) gained 7% and Monday.com ($MNDY) rallied 10.6%.

Beneath the surface of all the positive price action, it was a stranger picture. 52-week lows outnumbered the new records: 30 S&P 500 stocks hit lows, while only seven reached highs. The last time this scenario played out while the index moved 1% higher was December 1999.

Narrow market breadth on a big up day means the gains are being carried by a handful of winners. Still, momentum continuing the following day put the more skeptical minds at ease, with Monolithic Power Systems ($MPWR) and Sandisk ($SNDK) leading Tuesday’s gainers.

Sandisk’s move was boosted by a US$2,400 price target from Rosenblatt analysts, who describe the company as ‘not your father’s Sandisk.’ 

After hours, quantum firm IonQ ($IONQ) gained 12% after revealing an ‘industry-first’ quantum decoder that runs in the background without interrupting quantum execution. Elsewhere, rare earth miners MP Materials ($MP) and USA Rare Earth ($USAR) posted modest gains that built on a bigger rally post a deal with Greenland to expand U.S. military presence in the Arctic.

It turns out, Friday’s mechanical unwind left no scars. And quad-witching's real story this quarter wasn't the witching hour itself, but what happened once the contracts had rolled off. 

This is not financial advice nor a recommendation to invest in any of the securities listed. The information presented is for general information purposes only and intended to be of a factual nature only. Past performance and forecasts are not a reliable indicator of future performance. The value of your investments can go down as well as up and you may receive back less than your original investment. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.

Samy Sriram

Markets Analyst

Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.