Strategy: Triple Witching Trade in S&P 500
Trades generated by this strategy are available to paid subscribers
This is a long-short, mechanical (rule-based) swing trading strategy based on stock market return anomalies during the quarterly contract expiration day, also called "Triple Witching Day."
You can read more about this fascinating period in the stock market in the following (free-access) post:
This strategy can be traded on S&P index ETFs like SPY, IVV, VOO, index options, or futures, but due to the fact that SPY ETF typically goes ex-div on Triple Witching Friday, it’s preferred to execute related trades on full or micro-sized futures contracts.
This strategy triggers near the market close and typically holds a position for four days. The trade duration depends on the direction of the trade: short trades are typically closed before the close of the next trading day, while long trades usually last for a few days.
To enhance the returns of this pattern, we studied its monthly and weekly seasonal performance and discovered that it tends to perform better under certain calendar conditions.
The Triple Witching Trade in S&P 500 trading strategy, on average, executes five trades per year.
The P&L chart of this strategy looks as follows (SPY, no leverage, $100K account):
Strategy statistics:
Net Profit: 77.05%
Max Drawdown: 7.58%
Total Closed Trades: 116
Percent profitable: 70.69%
Profit factor: 3.262
Average # Bars in Trades: 4 [days]
Like most of our strategies, this one is also meant to be traded as part of a portfolio of diversified strategies. Due to the fact that it typically holds positions for a short period of time, it allows for good usage of working capital and fast compounding of gains. Also the fact, that it’s a long-short strategy adds a benefit of diversification to portfolios of mostly long stock market strategies.
TradeMachine subscribers receive email alerts with position updates each time this strategy enters or exits a trade. Some strategies include take-profit and stop-loss price levels.
Past performance is not indicative of future results. Results based on simulated or hypothetical performance have certain inherent limitations. All posts are subject to the disclaimer on the About page.