Wall Street takes sharp downward turn

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Wall Street takes sharp downward turn
« Thread Started on Dec 19, 2008, 12:50am »

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Wall Street takes sharp downward turn
Posted: 04:42 PM ET
By Catherine Clifford
CNNMoney.com
NEW YORK (CNNMoney.com) — A selloff on Wall Street accelerated in the last hour of a volatile session as traders squared up positions for a handful of options expiring Friday, known as “quadruple witching.”

The Dow Jones industrial average ended down 219 points, or 2.5 percent. The broader Standard & Poor’s 500 index fell 19 points, or 2.1 percent, and the Nasdaq composite shed 27 points, or 1.7 percent. All three indexes seesawed in early going.

The market is typically more volatile ahead of “quadruple witching,” when equity options, stock index futures, stock options and single-stock futures all expire on the same day. There are four such Friday’s in the year, and they tend to be preceded by increased market volatility.

“Most of the action around that occurs the day before,” said Fred Dickson, chief market strategist at D.A. Davidson & Co. “What we are seeing at the end of the day is an option and futures selloff related to tomorrow’s expiration.”