{"product_id":"stcov315exyo4","title":"Stocks \u0026 Commodities V. 31:12 (51): Explore Your Options by Tom Gentile","description":"Explore Your Options by Tom Gentile\u003cbr\u003e\u003cbr\u003eTis the seasonto buy options\nWith December now upon us, whats a\ntrader to do? As everyone starts planning\ntheir holiday parties, their vacations, and of\ncourse, their gift-buying, the market, too,\nis in planning mode. There are gifts from\nFather Wall Street for those who bear (no\npun intended) to look for them. They come\nin the form of seasonality. Lets take a look\nat a well-known seasonal pattern with an\napproach thats an alternative to sticking\nyour neck out with stocks or futures.\u003cbr\u003e\u003cbr\u003eSANTA CLAUS RALLY\u003cbr\u003e\u003cbr\u003eThe Santa Claus rally was first observed by\nmy friends at the Stock Traders Almanac.\nYale Hirsch and his son Jeff came across\nthe so-called seasonal week back in the\n1970s. Jeff, who has taught at several of our\nseminars in the past, says\nthe rally consists of the\nlast five trading days of\nthe year plus the first two\nfollowing New Years\nDay. Dont confuse this\nwith the January effect\n thats a different\nseasonal pattern.\u003cbr\u003e\u003cbr\u003eJeff says that his father\nwent back as far as 1950\nwith this Christmastime\npattern and found that\nthe S\u0026amp;P 500 averaged\naround 1.5% during that\nweek. Not huge gains, but\ngains nonetheless. He\ngoes on to tell me that this is mainly due to\nlower volume, general lack of news, and the\npros buying into the end of the year.\nLets change this around a bit to look at\noptions as an alternative way to invest in\nthis seasonal pattern. To do so, well look\nat last years Santa Claus rally and what\nalternatives there were to buying stocks,\nexchange traded funds (ETFs), or futures\nduring that short time frame.\u003cbr\u003e\u003cbr\u003eIf you were to buy the SPX at the open of\nDecember 24, 2012 and get in at the closing\nprice of 1426.66 and then sell the position\non the close of January 3, 2013 at 1459.37,\nyou would have a profit of 32.71, or a 2.2%\ngain. But what would happen if you were\nto trade options during this time frame? I\nanalyzed two different positions using the\nJanuary options on the following short-term\ntrading strategies:\u003cbr\u003e\u003cbr\u003e* Option 1 Buying a January 1425 [atthe-\nmoney (ATM) call option] for 16.75\non the close of December 24, 2012. The\ncost and risk of this option is the debit.\nThe cost is cheaper, but consists of pure\ntime value, so you need this option to\nmove in your direction.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133994791281,"sku":"V31C12_670GENT","price":2.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_a00b86a5-d1f4-47ba-9131-65b3806c220d.jpg?v=1739661187","url":"https:\/\/shop.traders.com\/products\/stcov315exyo4","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}