Stock Exchange Holidays

stock exchange holiday

Many conservative revenue generation trading methods rely on the time rot implicit in options pricing. When I establish an iron condor well OTM (out of the cash ), I’m selling option spreads and expecting those spreads to slowly shed value as the underlying stock or index trades inside a channel.

Other traders may use butterfly spreads or place OTM credit spreads on one side only (calls or puts ) ; all of these trades are based on time rot working in the trader’s favor. This is in opposition to the long option position designed to take advantage of my prophecy of a selected directional move for the underlying index or stock. Those positions lose value over time if the anticipated move does not occur, so time is not your friend for those trades.

One of the things on your checklist before making a trade should be a peek at the calendar to see if any stock exchange holidays are imminent. When time rot is on your side, stock exchange holidays are also your buddy. If the market isn’t open, it can’t move against your positions, but time rot is still occurring and improving the profitability of your position. I will often establish my OTM credit spread positions before long holiday weekends to add to my edge.

Another important factor to bear in mind is the historical seasonality of volatility. Trading activity slows during several of the holidays every year, as traders take time off to be with their families and exchange business tends to slow. March and October have traditionally displayed the highest volatility for the year, whereas the summer months and the week between Christmas and New Year’s Day are traditionally slow periods of market activity.

An old wall Street adage is “sell in May and go away.” It refers to the biases for many market participators to take holidays and long weekends over the summer, leading to lower trading volumes and lower volatility. This tends to favor systems like iron condors that benefit from slower moving, sideways markets.

Another factor tracked by many traders is which monthly options cycles have five weeks and which only have 4 weeks. Option prices will be skewed thanks to the number of the number of days in an option cycle. If your trading style involves consistently selling premium each option cycle, you should be conscious of the five week option months, since the amount of premium income may be affected.

Options trading methods that benefit from the time rot of options prices are interesting for monthly revenue generation. Focus on the calendar and put time on your side.