Expiration of options and futures contracts increases the volatility leading to higher than normal trading volume. The volatility and volume are higher on the triple-witching days, which happen on the third Friday of the last month of a quarter. There are some distinct patterns prior to, during and following the triple-witching days.
Patterns in June are even more predictable. In the last 25 years, the week following triple-witching in June have been positive only four times.
We have applied our proprietary algorithm for trading signals for a group of sector ETFs and the results are very impressive. Since 2000, our strategy has produced 56 trades with 93% success rate. The average gain is 2.6% with average holding period of eight calendar days, giving an annualized return of 118.3%.
In our simulated portfolio we have used a combination of short trades for sector ETFs and long trades for ultra-short ETFs. Our strategy does not trade all sectors. Also, not all sectors trigger a trade every year. The sectors level results are:
| Seq. | ETF | # of Trades | Win % | Avg. Return | Avg. Days | Annualized |
| 1 | DIA/DXD | 9 | 89% | 2.3% | 6 | 136% |
| 2 | SPY/SDS | 10 | 100% | 2.6% | 6 | 151% |
| 3 | QQQ/QID | 11 | 91% | 2.5% | 9 | 101% |
| 4 | IWM/TWM | 9 | 78% | 3.1% | 10 | 117% |
| 5 | XLB/SMN | 11 | 100% | 3.7% | 6 | 218% |
| 6 | XLI/SIJ | 12 | 92% | 2.6% | 9 | 103% |
| 7 | XLF/SKF | 6 | 83% | 2.0% | 8 | 91% |
| 8 | XLK/REW | 13 | 92% | 2.6% | 8 | 125% |
| 9 | XLY/XLP | 6 | 83% | 2.2% | 10 | 80% |
We start looking for entry signals starting during the triple-witching week – the third week – of June. Once our entry signals are triggered we will send out trading alerts.
