Effects of the Witches' Sabbath on Trading

On this day, hedge funds and brokers profit particularly, as they profit strongly from falling, but also rising prices with large quantities of derivative products. In addition, they have to try to replace expiring products with new ones. In order to make good use of these expiration days in the year, the hedge funds therefore artificially increase demand on these days and thus create fluctuations in prices worldwide. This procedure is also called rolling in trading.

However, investors should know that these fluctuations are only temporary and that supply and demand quickly neutralise each other again. However, for short-term investors, such as day traders, these large fluctuations in prices represent high risks. For this reason, it is important to know how to trade the witches' Sabbath.

Trading the Witches' Sabbath: Here's what you need to know

Just because it is a Witches' Sabbath does not mean that every price is subject to high volatility. However, investors should be aware and prepared for the potential possibility of the fluctuations occurring. While long-term investors can tend to sit back and watch the spectacle on Witches' Sabbath, speculators are in turmoil on this day. They can either profit from the Witches' Sabbath or lose on this day. With a suitable strategy, you can ensure that you are always among the winners as a day trader.

Trading Strategy on the Witches' Sabbath: How to proceed

The trading strategy on the Witches' Sabbath depends on the derivative to be traded. Shares, futures or options are conceivable in the form of derivative products. It is important to note that there is a triple coven and a minor coven.

What does this mean exactly? In the vernacular, the witches' Sabbath is always set on the four dates in the year at the end of the quarter. These dates enter the asset classes futures and options as well as other derivative products that are tradable on a futures exchange. This day is also called the triple witches' Sabbath. On this day, there are sometimes large swings on the world's futures exchanges at the time of expiry.

In addition to the triple witches' Sabbath, there is also the minor witches' Sabbath. This always takes place when options on shares and indices expire. Since futures contracts do not expire on this day, this day is usually not mentioned in the reporting on the witches' Sabbath. In fact, however, it is also a witches' Sabbath on this date. The swings may not be as volatile throughout the day as on the triple Witches' Sabbath. But the fact is that every single price fluctuation that can be predicted represents an opportunity for one's own trading.

The times of the coven should therefore be noted in every trader's calendar. The small witches' Sabbath takes place on every third Friday of a month and is also known as the small expiry day.

Trading Options on the Witches' Sabbath

Those who trade options on the Witches' Sabbath should use the open interest as an indicator for their own trading. Open interest includes all options and futures as derivative products that are still open at the closing price of a trading day. If this number should move drastically up or down around the witches' Sabbath, this signals a change in the flow of capital.

In the short term, investors have two courses of action in this situation:

•     Keep feet still, but hedge positions with a stop loss to avoid a knock-out.
•     Move the price by buying and selling with other traders in such a way that the price of the underlying asset has a positive effect on their own strategy.

Conclusion: Trading witches' Sabbaths is only for professionals

The unpredictability of the witches' Sabbath means that small investors, even those with https://exnesslatam.com/pt-br/conta-de-demonstra-o/, are at the mercy of market fluctuations. Only a stop loss can protect investors in the short term. On this day, small investors therefore need a good nerve to avoid panic transactions. Professional and day traders, however, can profit from the swings in the markets on the four days of the witches' Sabbath in the year and generate lucrative profits in the shortest possible time.

For both types of investors it is advisable to mark the Witches' Sabbath in the calendar in order to be able to classify the price fluctuations. If you don't have the witches' Sabbath in your head, you can't explain the price changes with your mind and think they are jinxed. However, as we have learned, the witches' Sabbath is merely the quarterly closings of major futures exchanges.