Squawk Morning Briefing: Quadruple Witching

Quarterly expirations have the potential to be a bit more volatile than other months as we’ve noted before. Not only do index futures stop trading, but we also have many index ETFs which go ex-dividend. Furthermore, since index futures and options settle based on the opening print, there is the potential for volatility at the open.

Monthly expirations also have issues related to index options settling based on the opening print, but adding in the futures positions usually leads to a larger total open interest settling at one time. We like to think of this as institutional products in the morning and retail products in the afternoon. This isn’t strictly the case, but we generally say the larger players in index options (like options on the SPX) and smaller players in index ETF options (like options on the SPY). We also know that institutional and retail traders are often leaning different directions and this can lead to different biases throughout the day.

Sometimes the shifts are mild and we get a calm, orderly expiration. But when they’re not, moves can be sharp. And this is where we need to caution about interpreting too much from one sharp move. Impulsive moves tend to be sharper than corrective moves, but that is not a rule. We can get sharp corrections, too. So we don’t want to let a swift move in one direction or another sway us too much unless the wave structure clearly indicates a trend likely to continue.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
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