“Witching” occurs when contracts expire. The contracts that expire include: futures, single stock futures, stock index options, and single stock futures. Witching occurs on the 3rd Friday (non holiday) of March, June, September, and December.
These times of year bring in extra participants and can alter the dynamics of the market (I can only speak from the futures side). Volume is being spread across front and back months and creates an arbitrage opportunity. Volume can be misleading (for the record I think volume has been misleading for a few years) during these times of year. The market tends to find the right strike prices.
For more information see below.
http://www.onechicago.com/?page_id=22
http://www.888options.com/help/faq/expiration.jsp
http://www.cmegroup.com/
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