SPY and the Quadruple Witching (Bearish Play 12/17/2021)

[Tiddly]

This will be the first little thread I make on the forums, so bear with me. Many of the things I typically post in regards to SPY are speculative and mostly predictions, but I do believe when it comes to Quadruple Witching that it provides a better chance at profit on the downside even if news isn’t all doom and gloom.

[size=4]So… What is Quadruple Witching?[/size]
Basically it is when four different assets (stock index futures, stock index options, stock futures, and single stock futures) expire all at once. This event occurs each quarter on the third Friday of March, June, and finally December. Next week is when when we will see this happen.

[size=4]Okay, but what does THAT mean?[/size]
It means a ridiculous amount of open interest drops off the face of the earth. Think of SPY monthlys disappearing, but on a larger scale due to it including Index options and futures.

[size=4]Here’s an example of what can occur…[/size]

This was the most recent and I think the more memorable one for everyone as this along with mentions of Evergrande & Debt Ceiling Talks kept the Market from rebounding for so long. Will it be as bad? Likely not, as you these two important situations happen that likely spooked a lot of people out of the Market for a time.

[size=4]Best entry?[/size]
You’d likely be looking at getting a put Thursday into Friday. We’re still seeing a resistance at 470, so if you perceive 470 as the ‘top’ of next week, you can try to buy a put there. So far the Monday after involves a gap down, but I won’t recommend holding any options EOD Friday as there has been times that SPY has not gapped down after a Witching Hour.

[size=4]Disclaimer[/size]
The biggest problem I see with this method is that it’s a natural part of the Market, meaning it can be ‘priced in’ or outright ignored on a good trading day. If you do consider investing in my madness, please don’t risk anything you’re not willing to lose. My reasoning for bringing this up is that we’re struggling to reach above 470 and this year being highly volatile overall has these events come with an expected outcome of downward movement within the latest Monday.

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[DarKnight]

From what I’ve read and from personal experience, quad witching does not indicate a certain directional move. I actually decided to do some digging to support this claim. Here is what I found:

September 2021 quad witching:

June 2021:

March 2021:

December 2020:

Looks like if you bought puts at the EOD before quad witching you would have made money the next day on the previous 4 quad witching hours. Looks like it’s safer to buy puts a couple hours before close.

I also checked all of 2020 and the data was not as strong but September 2020 trended down. Both June and March 2020 opened higher than previous day close but ended much lower than previous day close… So puts were profitable last 7/7 quad witching hours.

Color me surprised.

[Conqueror]

Thanks to the both of you @Tiddly and @DarKnight. This seems like a really interesting play that might pan out to be a quick turnaround profit. Excited for it.

[tedro]

Good to see you again Tiddly. I remember you talking about this concept a few months back and I it worked out. I’m going to open a few small positions. Thanks for this!

[Tiddly]

One thing I will warn about is that SPY is currently in the upside of a bounce. There is a higher chance that 470 is no longer the resistance given it touched 471 during AH. So it’s probably for the best not to get into this kind of play earlier than Thursday if that’s the case.

If Thursday is green, buying between 4 and 4:15PM may be the best window if it has a strong movement upwards before EOD.

[Tiddly]

In my opinion, today ended good. This at least gives me the impression that the market isn’t able to fully recover from its correction seeing as it slumped from 473 to 466 into the afternoon. My expectation tomorrow is that it will struggle to move beyond 470 once again, though unsure whether or not it’ll be so weak as to fall below 465.

Mostly predicting movement just by what we saw today. Basing it on similar movement in September’s witching.

[juangomez053]

Worth a listen leading up to FOMC

E58: November's CPI, preparing for a downturn, macro outlook, Better.com's botched layoffs & more

[Tiddly]

So… today was pretty crazy with that $10 swing with the FOMC meeting. EOD saw us once again at 470, reaching 471 during the first 15 minutes of AH. I’m not exactly worried about any of the AH movement as much of it recently didn’t exactly entail good/bad gaps in PM.

We reached the top resistance (my perception of it). I decided to take a position at $470 with ITM Puts expiring next week. If I notice that 470 isn’t the top that I expected, I’ll likely reposition for EOD Thursday. For anyone that is already in, I wish you the best of luck.

Those that aren’t in, I’ll reiterate that if there is substantial movement up EOD Thursday, then your best bet is to enter between 4-4:15PM. Also that when you play a bearish play against the Market, there is a higher chance of losing as ‘Markets are meant to go UP’. Play with a gambling entry and play with a strict loss tolerance.

[noj22]

Thank you for the update. I almost got in today but I wanted to give it one more day. That last two hours was crazy.

[good2bgreek]

Was keeping an eye on this, I’m wondering how things will behave with such a big dump today

[Tiddly]

Congrats to those who decided to get in as early as yesterday and held even through the $3 gap up! I know personally my account is up $600 (37%) as of ending the day.

Sadly though I’m no longer a bear as my SPY put ended up being a call, and I’m filthy for keeping it since it was green. [size=1]i pray for no gap down so i can get out without hemorrhaging my gains ;3;[/size] Probably will enter back into puts on open. ANYWAY, this downward movement we saw is likely going to lead into tomorrow regardless of which way SPY goes during after hours.

I’m still under the impression that SPY will touch down at 460 which is major support. That is likely where I’ll sell most of my puts tomorrow if we happen to get there. As to how possible it is to break that support, I think we’d need bearish news, but anything is possible with this rollercoaster. So far nothing has changed besides possibly people’s perspective in the current market’s health. I hope everyone is well rested for a highly volatile Friday.

[Tiddly]

Once again good job with today. It seems today was also SPY’s dividened day which took a chunk out of it too.

Whether you end up taking profit open or are getting in today, it’s likely to be red. I’d recommend watching 460 as they has been support prior. If that breaks down, puts will likely print.

There is another potential gap down for monday, but would only be willing to throw lotto tickets at it instead.

[Ak_stock]

Thank you! Very informative and a great learning experience

[DarKnight]

Holy shit… I can’t believe the quad witching DD panned out even though I did the research. Turns out past 8/8 quad witching were bearish, this will make it 9/9. If you followed my advice and bought 2 hours before close then you could have got puts when SPY was 468-469 easily. I didn’t even participate in this play (licking wounds) but godspeed to those who did.

If you expect spy to go up or down any given day to be 50-50 then 9/9 red predicted days is about 0.2% chance of happening. I suspect spy has more green days than red so that chance is actually higher than the actual.

[tedro]

Nice work on this @Tiddly

I will see you for the next witching!

[Alpha01]

This was a great call out. Even with suboptimal entries, this worked well in the first couple of hours today. Appreciate the call out!

[good2bgreek]

Agree great job!

[Tiddly]

Sadly today I ended up being red mostly out of me fumbling to recover losses from the accidental SPY call overnight. I’m not on the impression that Monday will be a gap down, so if you try to play that, remember it’s a gamble.

I’m actually pretty surprised myself this didn’t go as bad as my doubts thought it would, actually better than expected anticipated with that FOMC meeting. Regardless, thank you for those who decided to play this, I’m happy to have made everyone (including myself) a sizable chunk of $$$