Reminder from Tim: For some heavy-duty options backtesting, remember Slope readers get a hefty discount from CMLViz – – check it out.
Now that we have both the midterm elections and November’s monthly options expiration (OpEx) behind us, let’s look forward to potential higher probability setups as we head into Thanksgiving and the Holiday shopping season.
We’ll be using Dutch rules (as in Market Sniper), looking for a minimum of a 70% probability of success.
A few clear trends emerged from the lookback during the past ten years (i.e. when options trading began to take off en mass).
NOTE: These are not trade recommendations, consult a blah blah blah… risk disclaimer … Federal rules nonsense… don’t risk money you can’t afford to lose (now THAT is important).
Got it? Ok here we go:
We’ll begin with the elite from the past ten years’ lookback period.
90% winners
1. $HD and $UNH – 9 of their past 10 December OpEx periods closed green, including the five most recent for both
2. $KRE – Regional banking index 9 of past 10 years December OpEx period ended higher than it opened. That includes 4 of the past 5 years
3. $DE – Green on their farm equipment, and on traders’ screens 9 of the past 10 years. Four of the past 5 years included
80% winners, here’s where we see a lot of financial stocks
1. $XLF, $AXP, $JPM, $MS, $USB, $WFC – 8 out of their past 10 years’ December OpEx periods ended green, along with four of their past five
2. $DIS – 8 of past 10 years close green, with one of the two losers being a net winner for put sellers as close was pennies beneath open
3. $GOOGL – 8 of the past 10 years has seen its December OpEx close above its open, including three of the past five years
4. $LOW – Trailing its much better run competitor, Lowe’s Home Improvement comes in only slightly behind at 8 of its past 10 December OpEx periods closing green. But only 3 of its past 5 ended positive
5. $TGT – Target another 8 out of past 10 December OpEx green machine, including four of its past five
6. Airlines $ALK, $DAL, $UAL 8 of past 10 winners
7. Big DJIA names $UTX, $TRV, $PFE also in the 8 of past ten club
70% winners
1. $BAC, $STI – 7 of past 10 years’ December OpEx green here, and 4 of their past 5
2. $V and $MA – Visa and Mastercard 7 of past 10 years green. 3 of past 5
3. In tech $AMAT, $IBM, $INTC, $MU in the 7 for 10 club
4. Retail group includes $WMT, $COST, and $SBUX in 7 out of past 10
5. $XLP, $GIS – Consumer staples ETF and General Mills 7 of past 10 closed green, with one of the losers closing pennies beneath open for each
6. $ANTM, $BA, $CVX, $MMM, $MRK, $PG, $LUV, $JBLU – 7 of past 10 years closed green
Special notes on some others
1. $GS – Couple of oddities with Goldman Sachs. Overall only 6 of past 10 years’ December OpEx periods have closed green. But two of those losses saw the OpEx close pennies beneath the open, making any credit spread sold a winner from a pure credit collected standpoint
2. $FB, $TSLA – Less data available, but 4 out of their past 5 December OpEx periods have closed green
But wait, I see y’all shaking your heads and thinking, “Money this is a bearish blog!”
The problem is, there are far fewer historically speaking.
And here they are:
1. Gold and $EWZ – 8 of past ten years closed December OpEx in the red, including each year of the past five!
2. $BBY – 7 of past 10 years closed December OpEx in the red, but only 2 of the past 5 years found a bearish end
3. $FXI – 6 of past 10 years China’s main large cap ETF closed bearish, with two of those losers likely winners for credit spread sellers as their closes were mere pennies above open
Some clear trends emerged from this:
1. Banking sector push into Holiday shopping season madness
2. Airline sector push into the two busiest travel holidays of the year
3. Hardware and Healthcare get a boost. Healthcare we can understand from traditional sign-up period, but hardware stores? Guess a lot of tools for Christmas? Awfully heavy for those reindeer to haul.
Trade well Slopers!
