Friday is a “triple-witching” day on Wall Street, but members of the Investing Club should not be too concerned about it. What is it? A so-called triple witching happens once each quarter, for a grand total of four times per year. It’s always on the third Friday of the last month of a quarter, so March, June, September and December. It’s called that because three types of derivatives all expire on the same day: stock index options, stock index futures and stock options. The simultaneous expiration has, historically, been associated with a rise in trading volume and volatility. That’s especially true in the final hour of the session. Some people on Wall Street also refer to it as quadruple witching, but the takeaway for Club members is the same no matter what title it’s called. What it means for us In short, not much. We’re long-term investors here at the Club, not day traders. Our portfolio consists of long equity positions and cash. We’re not using shorts or options to protect us to the downside like a hedge fund might. When we buy a stock, we’re purchasing pieces of a company because we believe in its fundamentals. We believe the company will improve financially in the future — growing their profits and, in many cases, returning some of that cash to shareholders like us through dividends and/or share buybacks. In theory, as the market recognizes that growth over time, the company’s stock price will improve. Triple witching highlights the fact that market participants have different approaches and goals. It’s something for short-term traders to worry about. So, even if it gets mentioned on CNBC or in other corners of the financial press, we’re urging Club members not to spend too much time thinking about what it means for their long-term portfolio. Bottom line As fundamental investors, we’re really focused on material information that impacts our view of our companies — stuff about the company in particular, or one of its rivals, and about the economy overall. That information can cause day-to-day movements in the underlying stocks — and we watch that, looking for attractive entry points that we also highlight for Club members. But we also try to separate noise from significant news. It’s also worth pointing out that it’s been a rather volatile stretch for the stock market to begin with, and many observers expect that to continue for the foreseeable future. It’s something everyone in the market, including long-term investors, like us, need to be aware of and keep an eye on. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
