Stocks Are Slipping Because ‘Quadruple Witching’ Is Spooking the Market

By Teresa Rivas

Sept. 18, 2020 11:45 am ET

Futures and options tied to individual stocks and indexes are expiring simultaneously. The Dow Jones Industrial Average, S&P 500, and the Nasdaq Composite are all lower.

Stocks fell Friday, with indexes closing out a third consecutive week of losses.

The Dow Jones Industrial Average closed down 0.9% the S&P 500 was off 1.1%, and the Nasdaq Composite fell 1.1%.

As Barron’s reported earlier today, markets are braced for “quadruple witching,” as both futures and options tied to individual stocks and indexes expire simultaneously, which often indicates volatile trading.

“Quadruple witching may generate above-average volume, in part, due to the way traders/market-makers remove or trade out of hedges on existing futures and options contracts,” explains Ally Invest’s Senior Options Analyst Brian Overby. “This volume may create some volatility in the markets as traders take positions off and then redeploy that capital ...This is a hint of more uncertainty as we are approaching the year's end and quadruple witching volume may be some tinder to add to this uncertainty.”

Elsewhere, investors are likely looking to Washington, as legislators are expected to present a new spending bill to avert a government shutdown, and the government looks poised to ban TikTok and WeChat app downloads beginning this weekend.

As for individual stocks, Beyond Meat (BYND) fell 5.2% following a downgrade from JPMorgan, which worries the alternative meat producer won’t be able to meet high expectations.

Dollar General stock (DG) was up 2.3% after JPMorgan boosted its price target to $230, citing optimism about the discounter’s post-pandemic growth.

Tesla stock (TSLA) is up 4.4% after Piper Sandler increased its price target to $515, a new high on the Street, although not for the usual reasons.

Write to Teresa Rivas at teresa.rivas@barrons.com