Witches Sabbath (stock exchange)

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Four times a year, the world's three most important derivatives exchanges hold the Great Witches Sabbath , usually on the third Friday of the third month of a quarter on which futures contracts such as futures and options expire.

meaning

The futures contracts run on the Eurex futures exchange on these major expiry days . H. Futures and Options , as follows:

Expiry means that the settlement prices are determined at the specified times, on the basis of which the options and futures are valued ( settlement price ). Example: For DAX futures ( FDAX ) and DAX options ( ODAX ) this means that the DAX price level is determined by the stock exchange at 1:00 p.m. and this is the official measure for all futures contracts on the DAX that expire on that day is. For the FDAX, a settlement price is determined daily at 5:30 p.m. before it expires. The difference between the DAX price at 1:00 p.m. and the previous day's settlement of the FDAX at 5:30 p.m. will be credited or debited depending on the DAX price level. If the contract was opened on the day of expiry, the purchase price takes the place of the previous day's settlement.

The ODAX is handled differently. In contrast to the FDAX, there are various strike prices at which the options can be exercised. Daily settlement takes place here too, but the difference is calculated from the DAX price minus the strike price for purchase options and vice versa for put options from the strike price minus the DAX price. Again in contrast to the FDAX, only positive differences are taken into account. If, for example, the base price of a purchase option is above the DAX price, it simply expires worthless.

In the USA, the settlement prices are determined in the last trading hour of the trading day between 3:00 p.m. and 4:00 p.m. (New York City time). In contrast to Eurex, there is no graduation between the asset classes of equity options, equity index options and equity index futures. The expiry hours are called “Triple Witching Hour” in local jargon and are characterized by increased transaction volumes and increased price volatility.

Effects

Business on the futures markets is usually much larger than on the cash markets . For example, the average share turnover of the 30 DAX stocks is EUR 8–12 billion per day. With an index level of 4000 points, this corresponds theoretically to an equivalent of 80,000 to 120,000 DAX futures, but in fact an average of 170,000 to 220,000 contracts are traded.

Since the fair value of the DAX futures ( FDAX ) is kept at the mathematically correct value through a very efficient arbitrage , the FDAX can also be used the other way around for short-term manipulations of the DAX. If a large amount of FDAX were bought or sold on the futures markets, the price of the FDAX would move in the desired direction. An example: Selling a large number of FDAX contracts leads to the FDAX price falling below fair value. The arbitrage now ensures that there is an adjustment to the fair value by buying the FDAX future and selling the corresponding DAX stocks. As a result, the FDAX rises again somewhat, but the DAX falls at the same time.

If this happens shortly before the expiry at 1:00 p.m., the settlement rate for all DAX derivatives that expire at 1:00 p.m. can be influenced. In addition, there is no need to close out the FDAX contracts, as these are simply settled at 1:00 p.m. using the settlement price.

The Witches' Sabbath falls on the same day on all major stock exchanges worldwide. So contracts on other indices , international stocks, commodities, currencies etc. also expire .

Events

If the third Friday of the third month of a quarter falls on a public holiday, special regulations apply. At the Eurex derivatives exchange, the expiry date for many products is the previous exchange day:

  • 2010: 19.3., 18.6., 17.9., 17.12.
  • 2011: March 18, June 17, September 16, December 16
  • 2012: 16.3., 15.6., 21.9., 21.12.
  • 2013: 15.3., 21.6., 20.9., 20.12.
  • 2014: March 21, June 20, September 19, December 19
  • 2015: 20.3., 19.6., 18.9., 18.12.
  • 2016: March 18, June 17, September 16, December 16
  • 2017: 17.3., 16.6., 15.9., 15.12.
  • 2018: 16.3., 15.6., 21.9., 21.12.
  • 2019: 15.3., 21.6., 20.9., 20.12.
  • 2020: 20.3., 19.6., 18.9., 18.12.

The major expiry day is offset by the minor expiry day, which falls on the third Friday of every month or, on public holidays, on the trading day preceding it. On this day, some series of futures products will expire.

Web links

Individual evidence

  1. ^ CNBC: Witching Hour: CNBC Explains. September 17, 2015, accessed March 5, 2019 .