Stocks Languish as ‘Witching Hour’ Day Passes Quietly
Those who said the effects of Friday’s dreaded “triple witching hour” had been felt last week--six trading days before its quarterly Wall Street impact--were proven right as the stock market languished all day Friday, exhibiting none of the wild price swings that investors have come to fear on this occasion.
The market did show some spunk in the last half-hour of trading, as is usually the case on these third Fridays of the final month of each quarter, when trading expires at the 4 p.m. EDT close in three sophisticated financial investments.
The Dow Jones industrial average was down about 5 points 30 minutes before the close and finished the day down 11.53 at 1,762.65--a net gain of 3.93 for the week. Similarly, about 40 million of the 153.86 million shares traded Friday changed hands in the final 30 minutes. And of those, about 25 million were traded at the close.
But “it was . . . a non-event, just as we thought,” said Courtney D. Smith, a specialist in program trading at Twenty-First Securities, a New York investment firm.
Ho-Hum Session
All week, Wall Street analysts had been predicting such a ho-hum session on Friday because most traders of the “triple witching” securities--futures contracts on stock indexes, options on stock indexes and options on individual stocks--were thought to have traded out of their contracts on Sept. 11.
That day, the Dow Jones average took an 86-point nose dive. And many stock index futures contracts traded well below the cash value of the underlying stocks in the index, allowing traders of computer-directed stock programs to get out earlier than usual and at a larger profit than expected.
“Anyone who didn’t get out (of programs) on the previous Thursday and Friday should be fired,” said Robert Gordon, president of Twenty-First Securities.
Traders also had an incentive other than profits to unwind their programs before this particular triple witching day.
Friday marked the start of an experiment by the Securities and Exchange Commission to try to limit market volatility tied to the expiring financial instruments by requiring program traders in these index futures and options to disclose any imbalances between buy and sell orders.
Traders are reluctant to make such disclosures. So, many unwound their programs early rather than report the imbalances and risk giving away some of their strategies.
Specialists at the New York Stock Exchange received forms on Tuesday ordering them to report 30 minutes before the market close on Friday any imbalances of more than 10,000 shares in orders scheduled for execution at the market close involving the 30 stocks in the Dow Jones industrial average. They also were asked to disclose whether these were orders to buy or sell stock.
As these were reported Friday, the figures were made available to the Dow Jones and Reuters news services so investors could see what stock was available or was being sought and could act upon the imbalances before the market closed.
New York Stock Exchange President Robert J. Birnbaum said five brokerages reported imbalances of less than 10,000 shares, 11 reported “buy” imbalances and 14 reported “sell” imbalances. Neither Birnbaum nor SEC officials could say Friday whether the experiment had been effective in smoothing out the potential last-minute volatility.
Interest rates rose in the credit markets Friday, cutting prices of long-term government bonds more than $10 for every $1,000 in face value.
USX was the New York Stock Exchange’s most active stock, up 1 3/4 at 24 5/8 on turnover of more than 15 million shares. Robert Holmes a Court, the Australian investor, has expressed the intention of buying as much as 15% of the stock, and in recent days it has been rumored that other corporate raiders have joined in the bidding.
BankAmerica gained 1 1/8 to 11 5/8 on volume of more than 2.4 million shares. Earlier in the week, the stock was buffeted by rumors of new financial troubles that the company criticized as unfounded and irresponsible.
