This article was originally published in The Option Strategist Newsletter Volume 11, No. 23 on December 12, 2002.
As we head into the end of the year, it is time to turn our attention to matters such as the January Effect and other year-end tendencies. In recent years, the January Effect has changed its nature somewhat, but can still be a profitable item to trade. In addition, volatility patterns near year-end have a traditional look to them. We’ll take a look at both in this article, plus a couple of other oft-quoted “January barometers” to see if they really hold water or not.
This article was originally published in The Option Strategist Newsletter Volume 3, No. 14 on July 28, 1994.
We often write about volatility since it is the variable which most directly determines the price of an option. Oh, sure, the other variables are important — stock price, strike price, and time to expiration — but those are determinant things since we always know their value at any given time. However, volatility is the big question mark, the one variable that dances to its own beat, that can make or break a strategy even if the stock or futures price behaves as one expected.
