Options Trading Witching Dates Plus What Are Options On Futures

Options trading is one of the best ways to profit from the volatility in the underlying stocks. The more the stock price swings, the more profitable an options contract can be. With options, you can build a much larger stock portfolio as compared to the direct investing in those stocks.

Options contracts are now available on most of the stocks, commodities, currencies and other assets. You can even trade options on futures contracts. Now, most of the people trade stock options. When you trade stock options, you need to know a few dates that are popularly known as the Witching Dates.

All stock options contracts expire on the third Friday of each month. Options on futures expire on different dates depending on the contract. Sometimes, different classes of options expire on the same date. These dates are known as the Double, Triple and Quadruple Witching Dates.

Double Witching Days are those when any two of the different classes of options contracts like the stock options, stock index options or the stock index futures options expire. Triple Witching Days is when these three classes expire on the same date. This date is the third Friday in the last month of each quarter. Quadruple Witching Days are those when these three classes of options contracts expire along with the individual stock futures options.

Now stock options and stock index futures options are different contracts. You need to understand the difference between them. Now when you trade a stock index futures options contract, you need to first master trading that stock index futures contract.

Now, suppose S&P 500 stock index only rose 5 points in the day. So, you will be making ($250)(5)= $1250 in a single day. Not a bad amount. But the margin requirements for S&P 500 futures are high for most of the retail traders so they trade the E-Mini version of S&P 500 futures that has a value of only $25 multiplied by the stock index value. You need to know all these facts when you are thinking about trading S&P 500 futures options.


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