Best and Worst Stocks to Own During Triple Witching Week

The third Friday of the month is coming up, which means it’s expiration week for equity options. I’ve been in this industry long enough to remember when most options expired on that day, but with the rise of weekly expirations, it now feels like options are closing out all the time.

However, the third Friday of March, June, September, and December still feels special. These days are often called "triple witching days" as equity options, stock index options, and stock index futures all expire simultaneously. With three major instruments expiring all at once, there’s potential for spikes in trading volume and volatility. This week, I’m looking at how the stock market has tended to perform during these triple-witching expiration weeks.

Underperformance During Triple Witching Weeks

The table below shows S&P 500 Index (SPX) weekly returns since 2017. "Triple witching weeks" are the weeks that include the third Friday of March, June, September, and December. “Other expiration weeks” are the weeks ending on the third Friday of the other months. All other weeks are classified as “non-expiration weeks.”

Next week is triple witching week, in which stocks have tended to perform poorly. The SPX has averaged a 0.47% loss during these weeks, with 53% of the returns positive. These weeks have been significantly more volatile than other weeks as measured by the standard deviation of returns.

Expiration week in general hasn’t been great, with other expiration weeks averaging a return of 0.11% and less than half of the returns positive. Market gains have come during non-expiration weeks in which the index has averaged a return of 0.37%, with 61% of the returns positive.

This next table shows more recent data, going back to 2021. Expiration weeks in general have been bad, but especially for triple witching weeks. The SPX has averaged a loss of 0.29% during these week, with 39% of the returns positive.

Triple witching weeks have tended to be more volatile. Again, the market gains occur during non-expiration weeks in which the index has averaged a return of 0.38%, with 61% of the returns positive.

Triple Witching Days of the Week

The table below summarizes triple witching weeks by day since 2021. These weeks have tended to start off strong. The SPX was positive on those Mondays 72% of the time, averaging a gain of 0.14%.

Things unraveled as expiration day approached. Thursdays averaged a return of -0.19%, with 35% of the returns positive. Friday, triple-witching expiration day, has been a terrible for stocks, with the index averaging a loss of 0.36% and just 22% of the returns positive.

One thing I find interesting in the table below is that the triple witching day, or Friday, has the lowest standard deviation of returns. Poor stock returns are typically accompanied by higher volatility, but in the case of triple witching days since 2021, the returns have been consistently bad with little deviation.

Individual Stocks and Triple Witching Weeks

While the SPX tended to underperform in triple witching weeks, the table below lists stocks that have defied this trend since 2021. These are the 25 best SPX stocks to own during triple-witching expiration week, historically, sorted first by percent positive and then average return. Software companies are prominent on the list, including Palantir Technologies, (PLTR), Autodesk (ADSK), GoDaddy (GDDY), and Datadog (DDOG).

Finally, here’s the list of stocks that have underperformed during triple-witching weeks. There’s a clear theme in this table, with almost half the stocks having to do with real estate or construction.