ONLINE FOREX BROKER
2022-11-23 • Updated
Besides US Retail Sales data, Australian Unemployment Rate and New Zealand GDP this week will bring us Quadruple Witching – one of the four most important days of a year for futures and options!
Quadruple witching refers to four days during the calendar year when the contracts on four different kinds of financial assets expire. The expiration date is the point at which a position automatically closes. In other words, traders will have to decide what they want to do with their open position before the expiry date. The days are the third Friday of March, June, September, and December. The assets are:
Options contracts also expire monthly. Futures contracts expire quarterly. Because traders and institutions run out of time at the close of trading, there is a lot of portfolio re-balancing, contract rollovers, and more. The last hour of the trading session (22:00 to 23:00 GMT+3) is when the volatility really increases, and assets swing dramatically.
Because all four types of contracts expire on the same day, the quadruple witching day is usually accompanied by bigger trading volumes and volatility. On June 18, 2021, a quadruple witching day, a near-record volume of single-stock equity options was set to expire at the end of the day in the amount of $818 billion. As a result, a near-record of single stock open interest of about $3 trillion stood on June 18, 2021. Open interest refers to how many contracts are open during any given point during the day. It is an important metric for traders to watch since a large amount of open interest can move the value of the underlying stock.
But you need to know, that these Freaky Friday days (the second name for the day is even stranger than the first) in general are not bullish or bearish. You cannot just buy or short sell and make guaranteed money. What is guaranteed, however, is that there will be a big surge of volatility. There is on average 40% more volume on this day than the average.
Source: https://www.bloomberg.com/news/articles/2020-09-18/stock-traders-brace-for-quadruple-witching-amid-options-anxiety?sref=qgDWnyMx
Also, note that the last hour of the session is usually bearish because long positions are prevailing against short ones, and closing these trades might cause a plunge in prices.
US 500 and US 100 will be more volatile this Friday. Because of trading volumes, US 500 index will be able to reach distant resistance at 4370 or plunge through the 4450 level (if the Index doesn’t do this earlier this week).
The same goes for oil, gas, and gold, so keep an eye on XAU/USD, XNG/USD, and XBR/USD. Brent oil is surging for several days already, so we may see strong pullbacks to the $71 level.
In stock market, consider trading such companies as Tesla or Alcoa because they either have huge options volume or are commodity-based. Moreover, Alcoa is on the rise because the aluminum price is skyrocketing. Both rise to $52 and plunge to $46 levels are possible.
In a call scheduled for January 25, 00:30 am GMT+2, the Tesla Inc. team will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.
The Netflix stock (NFLX), with a market cap of $145.17B and a whooping 10 000+% rise since its inception 16 years ago, experienced some turbulence for a short period last year while trading around the $250 share price. However, the NFLX stock quickly recovered and rose to over $300 towards the end of the previous quarter of 2022.
The Q4 earnings season has been interesting, mainly because of the turbulent global economic outlook. On this premise, analysts forecast a disappointing performance for several stocks ahead of the Q4 earnings report publishing.
Last year was tough for the Japanese yen. USDJPY gained more than 30% over 2022, striking above 150 in October. While anticipation of slower Fed rate hikes pulled the pair below the 130 level at the start of 2023, the speculations over the destiny of BOJ’s yield control policy grabbed the attention of the Japanese assets in the middle of January. What lies ahead for traders of the Japanese yen?
Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
In a call scheduled for January 25, 00:30 am GMT+2, Microsoft will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.
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