In the past, the month of January has had a good track record in predicting the trend of the stock market for the upcoming calendar year. Through history the “January Effect” was a result of tax-loss selling which causes investors to sell their losing positions at the end of December or subsequently waiting until January to take their profits to defer the capital gains a further year. Let’s review the tendencies.
One of the challenges retail investors face is having the capital resources to participate in many of the Wall Street darling stocks. With billions of dollars at the disposal of hedge fund and money managers, it doesn't take long for stocks with a promising future to be bid up to levels that exceed the reach of the average investor.
Sell in May and go away has been a well observed seasonal trend tracked by the Stock Trader’s Almanac since 1950. It makes complete sense why it occurs in regards to lower trading volumes during the summer and increased investment flows during the winter months.
For those of you that did't catch the article we posted at the Montreal Exchange's blog spot optionmatters.ca, I thought I would post a similar article on repositioning a losing stock position using put options. Given the fact that we are now in the midst of a moderate stock market correction, aka pull back, aka retracement etc, I thought our readers might find it relevant and perhaps even a little helpful.
After President Andrew Jackson abolished the Second Bank of the United States in 1836 (old central bank), the primary medium of exchange were banknotes issued by private state banks, that were promises to later pay gold and silver. An illustration of that was this Canal Bank Note from New Orleans.