The January Seasonal Trade (Preview)

By Lawrence G. McMillan

This system has been successful over the years.  It is a short-term trade, wherein we buy “the market” at the close of the 18th trading day of January.  The position is sold four trading days later.  The basis for this system is that institutions usually receive large cash infusions in (early) January.  They employ this new capital somewhat judiciously during the month, but by the end of the month they want to be fully invested so that a large cash balance is not showing on their month-end reports.  Hence they buy at the end of January.  Traders familiar with seasonal systems know that the market generally rises at the end of each month, but the effect is greater in January and October (hence, we also normally trade the “October Seasonal System”).

Table 1 shows the results of this system since 1986, when we first began tracking it.  In the “Exit” column, some of cells are highlighted in yellow.  They denote the years in which we exited after 4 trading days.  Prior to that, the system had called for holding five days, but we changed that in 1999...

Read the full feature article (published 1/20/17) by subscribing to The Option Strategist Newsletter.