Quadruple Witching

Quadruple Witching

Early morning on CNBC, they are singing “Ding dong, the witch is dead,” and “That ole black magic” as the stock market continues to rally (and has just opened UP 50 points), in spite of this being a quadruple witching day. While the stock market has been rallying for the last 2 weeks, there is always concern about volatility on triple or quadruple witching days, as all the options expire simultaneously and must be closed out or left to expire. Historically we have seen bond yields drop as investors move into the security of bonds during volatile markets. But this morning, the yield on the 10 year bond is up slightly from the close yesterday.

Should you be concerned about mortgage rates if the yield on the 10 year bond is rising? With the Feds “subsidizing” mortgage rates by purchasing mortgage backed securities, mortgage rates have been holding steady at and around 5% for the 30 year fixed rate mortgage, and this is likely to continue for now. Yes, mortgage rates move slightly as the yield on the 10 year bond fluctuates, but the movements have been small recently. The yield on the 10 year bond is currently at 3.45%, after having dropped below 3.4% yesterday.

Investors are still moving into the markets trying to catch this moving train. If you had been invested in the market since the "bottom" in March, your investments would be worth 20% more. It's Friday. Who knows what news will break over the weekend or Monday morning?

Quadruple Witching

Quadruple witching,” which marks the simultaneous expiration of a number of different options contracts. Stocks usually push higher during such periods, which can also bring jumpy trading. The gains followed those in markets overseas and a round of buying on Thursday. Better-than-expected economic data is suggesting that the United States economy might be in better shape than some investors had feared.

Traders drew some optimism from European Union leaders who said at a financial summit in Brussels that economic stimulus measures are cushioning the worst effects of the downturn. They said the steps would allow a sustainable economic recovery and that no new stimulus is needed right now.Health care, technology and retail stocks led the market, while consumer staples and utilities lagged.

In midmorning trading, the Dow Jones industrial average was 50 points higher, while the broader Standard & Poor’s 500-stock index rose 0.84 percent. The technology heavy Nasdaq increased 1.55 percent. Earlier, markets in Europe and Asia rose on newfound optimism by investors that the American economy may recover from recession this year.