Speculative Derivatives Expiration

Four times each year the speculative derivatives expire at the same time. This usually happens on every third Friday of March, June, September and December.

The investment solutions that expire at the same time are:

• Options
• Index options
• Single stock futures
• Index futures

Since during these Fridays the market can become extremely turbulent, you should pay attention to the market movement during this time of the year. Additionally, if you are just making your first steps in the investing world, avoid speculation, because you may end up losing your hard-earned money.

The reason for the general stock market turbulence is that the traders that experience the expiring contracts hurry to close their positions. As a result a movement on the stock market is observed which can be in either a positive or negative direction.

The volatility of the market is further increased since the traders on the expiring contracts tend to close their positions during the last hours of the trading day.

Since the market is about to move in a certain direction, many traders increase their activity in order to take advantage of the resulting volatility.

If your focus is over the long-term, avoid undertaking whatsoever actions during these Fridays. You will see the correction of the stock market during the week that follows.

It is also recommended to withhold any trading activity during these Fridays, because these times are marked by general uncertainty, which may lead to the loss of money. You should also limit your trades during the end of the day when the closing of the positions is done by the traders whose contracts expire.

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For knowledge we can highly recommend you subscribe to the The Wall Street Journal.

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