How to trade seasonality 季节性交易

How to trade seasonality's

A simple way would be a Financial Spread Bet. You could buy an up bet on the SPY which is the S&P500 tracking stock from the 1st November to 30th April and switch to cash for the weaker months. Your stop would be around 30% below the index, so if the S&P 500 was trading at 1300 the SPY would be at 130.00 your stop would be 30% below at 91.00. With a 30% stop you would not be worried about shorter term swings.

Another way would be to use fixed odds bets with www.betonmarkets.net You could use Bull bets to bet the S&P to go up from 1st November to 30th April and then use Bear bets to back the S&P to be no more than 3% higher on the 1st November than it was on the 30th April. So if the market is down you would win, if it goes sideways or up less than 3% you would win. You could change the 3% margin but this would reduce your returns, but it would make the bet safer.

What holds up over the summer?

So far we have looked at the whole S&P 500. If we look at the S&P sector indices since 1990 which is as far back as I could find reliable data, we see that defensive sectors hold up better during the May to October period and in fact show a gain.

One of the best sectors has been Consumer Staples, big boring, cash rich companies such as Proctor& Gamble, Altria, Pepsico, Colgate Palmolive and Cocoa Cola

So rather than go to cash during the weaker months you could park your money in the Select SPDR Consumer Staples ETF (XLP). The average return on this has been over 4.8%, so adding this to your 7.1% (the return from the positive months) you're on 11.9% return betting the S+P 500. Over 15 years this has given a return of 8.8% per annum (without dividends reinvested).

Conclusion

As a trader or investor it's worth taking time to study seasonal patterns especially those with long track records. The above outlined strategy at its most basic would allow you to capture the majority of the year's stock market gains and still make a return on your investment from interest the months you are out of the market. A slightly higher risk strategy would be to rotate to a defensive sector in the weaker months which can be done cost effectively with an Exchange Traded Fund.