The Worst Week Of The Year For Stocks? (Flip For A Good Short?)

The Worst Week Of The Year For Stocks? (Flip For A Good Short?)

ByOddmund Groette Seasonal trading strategies

The worst week of the year for stocks is the last week of September, after the third Friday of the month.

September is a poor month for stocks, especially the week after OPEX day, which is the third Friday of the month.

Worst Week for Stocks September End

Related reading:

Trading Rules

Let’s backtest to find out the performance for the week after OPEX day in September:

  • We buy at the close of OPEX Friday, and we hold the S&P 500 for five trading days or exit the next Friday:
The worst week of the year for stocks
The worst week of the year for stocks

This seems to be a good week to be short (we flip it):

Stock market's worst week
Stock market’s worst week

Since 1960, the average gain (if you are short) is 0.87%, and the win rate is 67%. These are pretty solid results!

How This Week Impacts Long-Term Investors

The stock market’s worst week happens just before the best period of the year for stocks: from October to May. Thus, buying during this week on weakness might be a good idea due to the compounding effect.

If you’re a future net buyer of stocks, you want to buy as low as possible.

Market Sectors Most Affected

The markets most affected are the ones most volatile, such as tech stocks or stocks with a high beta.

Why Does the Stock Market Have a ‘Worst Week’?

No one really knows why the stock market goes down so consistently during this week.

However, September is overall a weak month, and so is the week after options expiration (OPEX).

I’ve got an Msc from Heriot-Watt University, Edinburgh (1996), in addition a to a business administration degree the Norwegian School of Management (BI – 1994). Did my mandatory military service in between.

After university, I worked two years as an auditor (1996-1998).

I co-founded Aksjeforum.com in 1998/99 - one of the first websites about trading and investing in Norway. It was later acquired by Digi.no in 2001.

I have written 4 books about trading (in Norwegian). One of them has sold 30,000 copies, a record for a financial book in Norway.

From 2001 until 2018 full-time independent prop trader (Series 7 in 2001) and investor.

2018-today: Investor, writer, analyst.

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