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The event occurs on the third Friday of the final month of the quarter, or in March, June, September and December, and typically brings increased volumes as traders close out positions or roll them over.
Quadruple witching carries more importance in periods of increased volatility as traders need to prepare for the possibility of big price swings just ahead of expiration.
In March 2020, for example, volatility surged as the COVID-19 pandemic prompted state governments to issue shelter-in-place orders that halted most travel, forced non-essential businesses to close and slowed the U.S. economy to a virtual standstill.
As businesses have begun to reopen, volatility has waned but is still higher than normal levels over the past five years, potentially heightening the impact of derivative close-outs.
Quadruple witching has less meaning in a low-volatility environment, although it can still lead to magnified swings.