This Friday the listed derivative markets will experience the event known as "Triple Witching." So how much do you know about this event and how it could impact your investments?

Here's a look at derivative expirations and how they affect you, as an investor, and how you can try to capitalize on related trading opportunities.

What's Triple Witching?

The term goes back to the 1980s, when index options (such as the S&P 500 "SPX"), index futures and stock options all expired on the same date at the same time. More recently, single stock futures were added to commodity exchanges, turning the event into "Quadruple Witching."

Typically, all of these derivative contracts stopped trading on the third Friday of the month and are valued as of the settlement or closing prices on that day. The CBOE has an excellent expiration calendar that options traders use and you can find on the CBOE Web site.

What you need to know: In 1987 there was a systemic breakdown in the markets (commonly referred to as the 1987 Crash) and many experts attributed the cataclysmic drop in the global stock markets to a popular strategy called portfolio insurance.

Portfolio insurance tried to ensure that the value of a portfolio did not go below some minimum level. In order to achieve this desired result, the portfolio manager would short-sell index futures. This led to a cascade of futures sell orders, which, in turn, impacted the stock and index options markets.

As a result of those events, several safeguards were put into effect over the next few years.

First, trading limits or "circuit breakers" were established on SPX futures. When the trading limit is reached (it's currently plus or minus 60 SPX points), then there is a cooling-off period whereby no futures can be traded in excess of the limit.

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