What Are Some Price Abnormalities Observed on Triple Witching?
Because traders will try to close or roll over their positions, trading volume is usually above average on triple witching, which can lead to greater volatility. However, one interesting phenomenon observed is that the price of a security may artificially tend toward a strike price with large open interest as gamma hedging takes place. This can lead the price to "pin" the strike at expiration due to this sort of trading activity. Pinning a strike imposes pin risk for options traders, wherein they become uncertain as to whether or not they should exercise their long options that have expired in the money or very close to it. This is because, at the same time, they are unsure as to how many of their similar short positions they will be assigned.