Overnight, market inflation fears reignited, US bond yields soared again, the Federal Reserve "rescue" lasted less than half a day, the US stock market suffered another huge shock, and the crude oil market also suffered a sharp setback as the pace of vaccination in Europe slowed.

Today, Friday, March 19th, with the arrival of Quadruple Witching Day, US financial markets may once again usher in a dangerous "bloodshed".

What is the "four Wizards Day" in American financial markets?

The "four Wizards Day" is the quarterly maturity date of financial derivatives for US stocks, which takes place on the third Friday of March, June, September and December of each year.

On that day, stock index futures, stock index options, individual stock futures and individual stock options expire at the same time. The last trading hour of the day is four witch hours (Quadruple Witching Hour), that is, 3: 00 p.m. to 4: 00 p.m. New York time. During the expiration period, the trading volume increased sharply and the volatility of the market intensified.

In the last trading session of the "Siwu Day", investors were eager to close their positions, resulting in a substantial increase in trading volume. therefore,The "Siwu Day" is usually accompanied by large fluctuations in the prices of stocks and derivatives.

On the "four Witch Day" day, a large number of futures and options of stocks and stock indexes are traded, and sometimes the positions closed by investors can be offset by new positions, and there will be no over-supply or excessive demand for financial products. Sometimes, investors adopt different investment strategies and work together in the market to create corresponding demand for buying and selling stocks, so as to profit from fluctuations.

The impact of "Siwu Day" on the stock market is most obvious during the opening and closing periods of the day, which is usually the time when futures and options expire.Investors buy and sell stocks during this period of time in order to fulfill the obligations of futures option holders. But for long-term investors, the impact of the "four Wizards Day" is minimal.

The scale of open position contract is huge.

According to Goldman Sachs Group's chart, before the latest expiration date, nominal open contracts for individual stock options in US financial markets could reach the largest ever except January, at more than $600 billion.

But at the same time, the number of contracts expiring in the S & P 500 is the lowest in at least a decade-only about 60 per cent of the 4 million outstanding contracts in March expire on Friday.

Goldman Sachs Group pointed out that the decline in open contracts in the S & P 500 reflects the continued diversification of trading volume rather than focusing only on contracts that expire in the quarter.

And given that the current level of the S & P 500 is higher than it was when most open contracts were bought in March, the Gamma of the US stock market as a whole is expected to have a limited impact on trading activity this week. However, before the "four Wizards Day", liquidity remained weak, which does not bode well for the US stock market.

What's going on tonight?

SpotGamma, a trading website, believes that the "four witch days" will only make the market more volatile: the S & P 500 is still at the threshold of 0 Gamma (a measure of the acceleration of option prices with the underlying asset price), but the Nasdaq 100ETF QQQ is still in a negative Gamma range. When the option expires, the NASDAQ may fluctuate sharply as negative Gamma converges to O. Given the share of technology stocks in the S & P 500, volatility in technology stocks is likely to be transmitted to the market as a whole.

Larry Weiss, head of stock trading at Instinet LLC, believes that the rotation of US stocks may continue, and technology stocks and small-cap stocks will continue to give up their previous gains. At a time when major index rebalancing activities are approaching, smaller market volumes will make the market more volatile.