Witching Hour
Categories: Derivatives, Trading
See: Triple Witching. See: Option Expiration.
While Happy Hour is full of free-flowing alcohol and happy, lazy, buzzed peeps, witching hour is full of trading frenzy. Every third Friday of the month, options and futures contracts on stocks and indexes expire. The last hour of every third Friday is called witching hour, when everyone is trading last minute before their contracts expire. It’s the hour Cinderella is running to her carriage before it turns into a pumpkin again.
Unlike Cinderella, though, life goes on and contracts are renewed to expire at a later date if agreed upon.
There’s also “triple witching,” which only happens on the third Fridays of March, June, September, and December when stock options, index futures options, and index futures all expire on the same day (rather than being staggered, like a drunkard). Like the Weird Sisters or Three Witches of Macbeth, triple witching shows us not only external forces that control us weakly humans, but also the darkness and depravity of the human soul for those who are dark enough to play with options contracts.
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Finance: What is a Derivative?23 Views
finance a la shmoop what is a derivative? well it's derived it's a something taken
from something else like a derivative of hot weather is thirst a derivative of [Girl takes sip of glass of water on a beach]
hunger is well you know crankiness that's diva thing you get there...
derivative of a 1/32 quarterback rating in the NFL is like serious wealth yeah
yeah discount double shmoop yeah look for it be on there with aaron
and a derivative of a stock or bond or other security is a something which
derives its value based on the performance of that underlying security
there are basically two flavors of derivative put options ie the right to [Ice cream flavors appear]
sell a security at a given price over a given time period and a call option, ie
right to buy a security at a given price over a given time period
well the price of that option is derived from the price of the security and a few
other factors like strike prices and duration and all that stuff
colonel electric the downgraded new version of General Electric is trading [Colonel Electric appears in a suit]
for 25 bucks a share a derivative of its share price is sold in the form of a
call option with a $30 strike price expiring about 90 days from now on the
third Friday of the end of that month well investors pay a price albeit
probably a small one for the right to then pay 30 bucks a share for colonel [Call option appears for colonel electric]
electric at any time in the next 90 ish days until that option expires making the bet
that the stock will go well above 30 bucks a share in that time period that
call option is thus a derivative of the colonel electric primary stock price got
it if you really want to get personal well here's the ultimate form of
derivative [Baby laying down]