The Biggest September “Triple Witching Day” Arrives — Will It Trigger a Sell-Off or Break the September Effect?

TradingKey - Ahead of this Friday’s much-feared “Triple Witching Day”, the S&P 500, Nasdaq 100, Dow Jones Industrial Average, and Russell 2000 all hit new all-time highs — the first time in nearly four years that all four indices have simultaneously reached record levels. With Fed rate cut expectations helping to break the stock market’s so-called “September Effect,” will the traditional volatility of Triple Witching also be defied?

What Is “Triple Witching Day”?

Triple Witching Day refers to the day when three types of financial derivatives contracts expire simultaneously on U.S. markets:

• Stock index futures
• Stock index options
• Individual stock options

This occurs on the third Friday of March, June, September, and December.

On this day, massive volumes of options and futures are either exercised or expire worthless, prompting traders to rapidly buy, sell, or close positions. This large-scale settlement often triggers abnormal market volatility and sharp price swings.

This Friday, September 19, marks the third-quarter Triple Witching Day — and expectations for significant market turbulence are rising.

Historical data shows that over the past 35 years, the S&P 500 has experienced slightly higher intraday volatility during the Triple Witching week than in the following week.

Brent Kochuba, founder of SpotGamma, said Triple Witching days have historically coincided with major market turning points. The firm estimates that around $6.3 trillion in equity and index-linked options will expire this week — one of the largest September expirations on record.

According to Goldman Sachs, approximately $5.3 trillion in notional value of options will expire this Friday, including $3 trillion in S&P 500 index options and $935 billion in individual stock options.

This represents about 8% of the total market cap of the Russell 3000 Index — potentially making it the largest September Triple Witching event in history.

SpotGamma warns that about 90% of the expiring options this Friday are call options. If these expire in-the-money and positions are unwound, the liquidation of bullish bets could remove a key source of buying pressure from the market.

Can the Stock Market Avoid the September Effect?

Friday’s Triple Witching day comes just two days after the Fed’s September policy meeting, where the central bank launched its first rate cut of 2025, pushing U.S. equities to new highs the next day. As of September 18, the S&P 500 closed at 6,631.96, up 12.76% year-to-date.

This rally is challenging the long-standing “September Effect.” According to LPL Financial, the S&P 500 has averaged a 0.7% decline in September over the past 75 years — making it the worst-performing month of the year. Yet this September, the index is already up over 2.5%.

The Fed’s rate cut is a key driver behind the continued rally. However, Wall Street strategists are still debating whether the Fed’s signals were dovish or hawkish.

Some note that while the Fed projected two more cuts this year, fewer than half of policymakers supported that outlook. Moreover, Chair Jerome Powell cooled expectations for a more aggressive easing path.

Truist strategists said historically, when the Fed cuts rates near market highs, it tends to fuel further gains — though not in a linear fashion.

LPL Financial believes the absence of any hawkish surprises, combined with the start of a new easing cycle, may be enough to offset seasonal headwinds and sustain risk appetite.

Ameriprise noted that the prospect of two additional rate cuts in 2025 remains supportive for equities and overall risk sentiment through year-end.

In contrast, Fundstrat analysts remain cautious, arguing that the risk-reward profile for the S&P 500 has become less attractive, with weakening market breadth over the past two weeks.

Additionally, signs of fatigue in the Nasdaq 100 suggest tech stocks may face profit-taking pressure before resuming upward momentum.