The Week After September Expiration (Preview)

By Lawrence G. McMillan

In the last few years, we have been trading the seasonal systems following June and September expiration.  By "expiration," we mean the third Friday of the month (the "old" definition of "expiration").  The market usually declines in the week after June and September expiration.  This doesn't hold true for March and December, for reasons that are not immediately clear, but that is somewhat irrelevant.  This year, this seasonal trade could fit in well with the recent bearish tone of this market. 

Simply stated, one shorts $SPX at the close on the expiration Friday and covers at the close a week later.  We will use SPY puts options, of course, in order to limit risk.  One can increase his leverage via the various expiration dates available.  If one uses a one-week SPY put option, that would give the most leverage B both in terms of risk and reward (percentage-wise).  Longer-term put options reduce the leverage and hence the risk.

The following table shows the individual results for the last 26 years, as well as summarizes them in term of both $SPX points and $SPX percentage moves (at the bottom of the table)...

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