The Bulls may be on the run. With very little prodding, investors have stepped back from the markets taking a look at both positions and the future of those decisions - even in the short term. Will the upcoming triple witching have any effect on how they view the markets?

This unusual event, done with the blessing of the Security and Exchange Commission, happens on the third Friday of the last month of the quarter. The "triple" in this event involves the simultaneous expiration of stock options, index options and index futures. These expirations all take place on the same day, stock options are priced at the close of trading day.

It is probably best to explain how each of these investor tools function. Stock options also referred to as warrants, puts or calls are tradable securities based on an equity's price movement. An "option" allows the investor to buy a stock within a certain time frame and at a set price. The value of this security will change based on the underlying value of the stock and the fluctuation of the price. If the strike price, or the price at which the option was bought is less than the current trading price, the value of those options is higher.

Index options, sold by the Chicago Board Options Exchange (CBOE), are basically the same as stock options. Investors use the "strike price" of an index or basket of stocks and base their trading on the underlying value of the index. The CBOE trades in 40 such indexes. The indexes that are traded here can be both broad based and narrow in scope allowing investors to purchase options in the Dow Jones Industrials and the Russell 2000 to indexes that follow gold, oil, technology, or international equities.

The index option adds to the volatility of a triple witching largely due to the increased activity from investors buying or selling the stocks within the index. Whenever an equity in a index moves, the value of the index changes. The greater the weighting or percentage of that equity in the index, the greater the movement of the index as a whole.

These two activities, happening simultaneously can throw the markets out of whack for a brief period, making investors unsure of the actual value of their investments.

A triple witching occurs and adds to this market disturbance with the additional expiration of index futures. Futures, a highly speculative investment common to commodities such as precious metals, live stock , or oil, is primarily a bet on the future close, whether profitable or not of a stock index.

The investor is faced with many immediate decisions on a Triple Witching day, somtimes called Freaky Friday, that need to be made at the time of expiration. Buying or selling, rolling existing contracts or looking for new ones, leave investors scrambling.

According to Steven V Le, California State University, Long Beach, the "reason that options effect the market so significantly is related to the fact that index futures and options settle for cash, while the common stocks that are used to hedge them settle for actual shares of stock." He adds that. "only the stock side is traded at expiration, while the futures automatically settle for cash without any trading taking place" creating an artificial effect on the stock market.

The volatility comes from the increased volume, the magnitude of the change, and the added pressures of the expirations of options and futures.

Triple Witching Days happen four times a year: the 3rd Friday of March, June, September, and December. The upcoming witching should prove interesting to watch as the markets have moved from their yearly highs.