by Susan Lyon
As Halloween approaches, the financial markets are experiencing their typical shocks and jitters heading into the end of the year. Here we look at the top 5 spooky market terms used to describe these trends, so you can navigate your All Hallow’s Eve accordingly – as well as the markets year round.
1. Witching Hours and Freaky Friday
Can finance sound more haunted than this? In earlier times, the witching hour described the time of day when witches and other supernatural creatures would enacted spells, work their magic, and abduct children who were still outside after dark. In the financial markets, we now have what we call witching hours; the double (and triple) witching hour occurs when two (or three) types of options expire during the same trading session. These are referred to as the double witching hour and the triple witching hour, respectively.
The triple witching hour is much more rare than the double, coming 4 times each year (in the third week of March, June, September and December). Because of its rarity, the triple witching hour is sometimes referred to as “Freaky Friday,” and is characterized by increases in market volatility.
2. Ghosting and Phantom Stocks
Generally, ghosts are thought of as dead souls that have been unable to leave Earth because of unresolved issues from previous lives. In the financial markets, Ghosting is seen when multiple market makers collaborate in order to unpredictably (and illegally) influence the price values for a stock or other asset.
The term phantom stocks, while not quite as nefarious, very simply refers to stocks that don’t actually exist in the traditional sense. These shares are created to give the employees of a company the incentives and benefits of stock ownership – effectively a cash bonus system – and thus without any returns or losses associated with such. Phantom stocks follow the price value of the real company stock shares those who hold it do not possess partial ownership of the company.
In the financial world, tombstones are a form of formal advertisement used to announce IPOs or when stocks are initially offered to the public. The term refers to written advertisements – traditionally on paper with a large black border and written in heavy black ink – that are issued by bankers before an IPO share offering.
Tombstones provide investors with the critical basic details about the stock offering and describe the underwriting groups central in the exchange. By law, a tombstone is an announcement, not an offer, of the security for sale.
4. Voodoo Accounting
While Voodoo is a religious and cultural practice that can be found in a variety of Caribbean and African countries, Voodoo Accounting is the form of accounting seen when a company implements dubious accounting methods in order to hide flaws in the business.
These “spooky math” methods often signal the eventual downfall of companies, as key problems are hidden and not addressed in a timely fashion.
5. Graveyard Markets
Much like an actual graveyard, graveyard markets are quiet, spooky, and still. Graveyard markets are seen after a long bear market, and they describe the period or environment in which investors are still waiting around for price declines to settle and for the market to turn around. Typically, these markets are very quiet as prices make an attempt to “rise from the dead” and find a new bull rally.
Prepare for a Finance Nerd’s Halloween
For Halloween costume inspiration, check out NerdWallet’s top nerdy costume picks of the season. Looking for a different costume idea that is both gory and ‘punny?’ Try dressing up as “corporate cannibalism”: of course, cannibalism refers to the rare occasion when people will actually eat other people. But in the corporate world, the symbolic version of this practice is much more common. Corporate cannibalism refers to companies that attempt to consume a greater share of their market industry by releasing products that directly compete with similar companies. Common examples include cell phone designs with similar features or automobiles advertised in similar ways.
Happy Halloween to all – and be sure to stay safe from these frights of finance.