Last Updated on June 19, 2022 by Quantified Trading
Our backtests indicate that both DAX 40 and Euro Stoxx 50 have much better performance during the futures expiration week compared to any other random week.
Let’s start with the DAX 40 contract:
DAX 40 futures contracts expire four times per year: the third Friday of March, June, September, and December.
The contract is one of the most traded contracts on the planet and is an important trading vehicle for thousands of traders. We trade the contract ourselves.
If you are not familiar with DAX 40 we recommend a primer on the index contract:
The expiration weeks in the US
Because the expiration of both options and futures contracts is a significant event, it triggers movement both in the derivatives and stock markets. We have previously covered the options expiration weeks in the USA:
Trading the futures expiration week in DAX 40
First, we remind you that we have previously covered the performance in the week after expiration.
Today we test the performance of the expiration week:
We go long at the close of the Friday before the expiration and we sell at the close of the settlement/expiration day.
We backtest the futures contracts, but we don’t use a futures backtest. Instead, we use a 100% margin.
100 000 is invested in March 2000 and reinvested into the next quarterly futures expiration week. Thus, there are four trades a year. There are no commissions or slippage.
This is the equity chart of the strategy:
The average gain is a positive 0.42% and the win ratio is 62%. The gain is 0.12% any random week.
If we break it down to quarterly performance we get this result:
All months show better performance than any random week while December is by far the superior one. However, the Santa Claus Rally in DAX 40 might be the reason for that.
Euro Stoxx 50
Let’s continue with the Euro Stoxx 50 contract:
Just like the DAX 40 futures contracts, the Euro Stoxx 50 contract expires four times per year: the third Friday of March, June, September, and December. The contract is heavily traded and we trade the contract ourselves.
If you are not familiar with the Euro Stoxx 50 we recommend a primer on the index contract:
We backtest the contract the same way as we did with DAX 40 and get the following result for all settlement months:
The average gain is a positive 0.3% and the win ratio is 54%. The gain is 0.18% any random week.
Thus, the expiration week effect is smaller.
If we break down the performance for each quarter’s respective month we get this table:
Let’s sum up for both contracts and conclude that there seems to be a positive futures expiration week effect in both DAX 40 and Euro Stoxx 50.