End of Month Trading Strategy in S&P 500 – Update

Last Updated on June 19, 2022 by Quantified Trading

The end-of-month seasonality is strong in stocks. A more updated version of the end-of-month effect was made not so long ago.

Let’s make an update and see how it has performed since then:

End of Month Trading Strategy

In plain English the strategy is like this:

  • Entry: Day 29, 30, or 31 of the month must be negative (this is calendar day – not trading days). Then enter at the close.
  • Exit: Two successive positive closes in a row OR SPY hits a 1% target. (no stops). Exit at the close.

Here are the results from 2005 until today:

The average per fill is 0.75% per fill. However, the equity chart is flattening lately, and 2014 was barely positive.

——————————

If you would like to have the Amibroker and Tradestation code for this strategy plus 70+ other free trading strategies published on this website, please click on this link:

For more trading strategies, please click here:

 

 

Similar Posts

  • Great to see you back writing, your blog is a great source of inspiration. Hope to see more frequent posts going forward, its very much appreciated.

    Regards
    Carl

  • Interesting strategy. I have heard/come across something similar before. I wonder if this strategy will experience a drawdown later in the year as rates will increase and the market corrects. Does anyone know if this works to the inverse in a bear market?

    • Please read the link to the original post. I think this is pretty straighforward: if calendar day 29,30 or 31 is negative, then buy. Exit at 1% target or two days in a row where SPY goes up from yesterdays close.

  • Hi Oddmund,
    Yes, the end of month straddle has a positive seasonal bias. But if I understand your strategy correctly, your target is either a 1% profit or 2 consecutive days above the entry price. Plus no stop. So, trade-to-trade, this strategy is destined to win whatever happens! Same as a “buy today and sell at a 10% profit” strategy. The only problem, and not a small one, is the drawdown you are exposing yourself to (eg. -54% for an entry on 31/12/2007).

    • FrenchyTrader,

      I guess you misread the exit setup. Oddmund wrote: “two successive positive closes in a row” not “2 consecutive days above the entry price”.

      Anyway, nice to bump into another French-speaking trader! I will visit your website.

        • Hi,
          Oh, OK yes I see. The reason I’d assumed you meant “2 consecutive days above the entry price” is because I could not replicate your equity curve using a “2 consecutive positive closes in a row or 1% target” rule.
          I’d backtested the system from 1995 on the SPY and the curve is indeed very linear until mid-2008. But after that, it gets rather choppy.
          For example: an entry on 29/07/2011 at 129.33 appears to qualify per the entry rules (last day of month, down day). The next 2 consecutive positive closes happened on 11/08/2011 and 12/08/2011. The trade would thus be closed on 12/08 PM at a price of 118.12 at a 8.7% loss. An entry on 30/04/2010 (last day of month, down day) at 118.81 would have been exited on 03/06/2010 at 110.71 at a 6.8% loss.
          I don’t want to be pedantic here, but I don’t see these or other similar trades reflected on the equity curve above. Or maybe you define a “down day” differently – i.e. not as a lower close?
          I don’t believe I can post pictures here, but if you shoot me an email I’d be happy to send you the full trade list, equity curves and TradeStation code.

  • Oops, Oddmund my apologies, I stand corrected! I hadn’t integrated the 1% target into the final code. My mistake!
    So yes, both the 29/07/2011 and the 30/04/2010 trades would indeed have been winners because the market bounced on the very next day (….just before a catastrophic fall in market prices).
    So the system certainly appears sound, with the understanding that you can live with the occasional 5% plus drawdown inherent to a no-stop strat.

    • Hi, thanks for info. If this strategy is “sound” is perhaps questionable depending on how you look at it,but I have been trading this real life. But i don’t go “all in”, just a small part of my arsenal. But yes, mean reversion not working as good as previous years. Oh, those market cycles.