Expiration of options and futures contracts increases the volatility leading to higher than normal trading volume. The volatility and volume are higher on the triple-witching days, which happen on the third Friday of the last month of a quarter. There are some distinct patterns prior to, during and following the triple-witching days.
Patterns in June are even more predictable. In the last 25 years, the week following triple-witching in June have been positive only four times.
We have applied our proprietary algorithm for trading signals for a group of sector ETFs and the results are very impressive. Since 2000, our strategy has produced 56 trades with 93% success rate. The average gain is 2.6% with average holding period of eight calendar days, giving an annualized return of 118.3%.
In our simulated portfolio we have used a combination of short trades for sector ETFs and long trades for ultra-short ETFs. Our strategy does not trade all sectors. Also, not all sectors trigger a trade every year. The sectors level results are:
|Seq.||ETF||# of Trades||Win %||Avg. Return||Avg. Days||Annualized|
We start looking for entry signals starting during the triple-witching week – the third week – of June. Once our entry signals are triggered we will send out trading alerts.