South Korea's stock market volatility is expected to grow early this week ahead of the so-called quadruple witching day that comes on top of escalating geopolitical tensions here, analysts said Monday.

The third quadruple witching day of the year, which falls on Thursday, may prompt local brokerage houses and foreign investors to rush to take profits through computer-based program trading, making the market more volatile, they said.

"Quadruple witching" refers to the simultaneous expiration of contracts for stock index futures, stock index options, stock options and stock futures, and usually causes volatile trading on the market.

Market watchers said the situation is slightly different from the first and second quadruple witching days of the years, which occurred in March and June, due to high tensions on the Korean Peninsula stemming from Pyongyang's recent nuclear test.
 

"Local securities companies and foreign investors could unleash program selling worth up to 300 billion won ($265 million) on the quadruple witching day, said Lee Joong-ho, an analyst at KB Securities Co. "It is difficult to predict who will digest such a sell-off."

Offshore investors have sold a net 24,000 contracts of KOSPI 200 index futures since August amid high geopolitical risks stemming from North Korea's nuclear and missile programs, Lee said, adding they may seek to cash in on gains through program trading on the quadruple witching day.

NH Investment & Security researcher Choi Chang-kyu echoed his view.

"Local securities companies alone may dump shares worth hundreds of millions of dollars on the quadruple witching day, adding to the volatility of the local stock market," he said.

North Korea carried out its sixth and most powerful nuclear test on Sept. 3, drawing strong condemnation from the international community. The isolated regime has also conducted a flurry of missile launches this year, including one that flew over northern Japan in late August. (Yonhap)