“Everyone on Wall Street has heard of “triple witching” days, when contracts on stock-index futures, stock options, and options on index futures expire at about the same time,” writes Kristina Zurla in today’s .

“Thursday is the first ‘quadruple witching’ day.”

“That is because of a new twist for expirations occurring Thursday and Friday: the addition of single-stock futures, a financial product that began trading last month.”

“Analysts say it is hard to say what adding single-stock futures to the mix means for the overall market because there is no historical precedent. Futures on individual stocks made their market debut Nov. 6 at OneChicago LLC and Nasdaq Liffe Markets. One single-stock futures contract represents 100 shares of the underlying cash security. (The products, in effect, are a cousin of options contracts on stocks.) The futures are a new tool used for hedging, speculation or other investment purposes.”

“While much of the early action in single-stock futures has been tied to stock dealers and ‘day traders’ who don’t typically hold long-term positions, trading volume and the number of positions outstanding — as measured by open interest — have been building slowly. Average daily volume in December was a combined 10,395 contracts for the two exchanges, while open interest on Monday stood at 27,727 contracts at OneChicago and 21,384 contracts on Nasdaq Liffe.”

“A rising amount of open interest is taken as a sign of participation from investors wanting to maintain a position or strategy over a longer time horizon.”

“Some traders and investors have said they are waiting for volume and open interest to continue building and to make sure both hold up over the long term before they begin trading the product.”

“A OneChicago representative said that while it is impossible to know for certain until expiration is past, it looks as if a fair number of investors will be taking physical delivery of the product — in other words, cash in their futures for the actual stock — rather than closing out positions. Such investors, who have bought a Microsoft Corp. single-stock futures contract at the close Friday, would then own 100 shares of Microsoft stock. This indicates that something other than simply speculative day trading is taking place in the market.”

“Analysts were reluctant to say just what impact that would have on the overall stock market. ‘There are some outstanding positions, but they aren’t huge,’ said Nick Kalivas, senior equity and interest-rate analyst at Refco Futures. ‘Certainly, I would suspect some arbitrage-related positions that need to be unwound or rolled, but I don’t know how to quantify it. It’s still such a young market and the volume is still not enough to have a big impact.’ “

“Triple-witching expirations can create volatile swings in the market depending on how many positions outstanding are still in play. Investors with long or short positions face a hard deadline to decide whether to maintain and roll positions forward, offset them or take delivery of the product.”