Seasonality Trading Strategies and a Pre-Christmas VIXY Example
Summary
The document explains seasonality as recurring price or return patterns tied to calendar periods and surveys several proposed effects: the Santa Claus rally, sell-in-May timing, weekday patterns, month-end and turn-of-month behavior, and a December pattern around VIX futures expiry. It presents seasonality as a way to form rule-based hypotheses from historical data, while advising that it be combined with other analysis because market behavior can change and historical performance is not assured.
A Python example illustrates a short VIXY position from December VIX futures expiration until before Christmas. It describes loading price and expiry data, creating entry and exit signals, applying the position to daily returns, and compounding those returns. The document reports cumulative strategy returns of 11.09 and a CAGR of 1.16, but gives limited detail about the sample period, transaction costs, borrow costs, or validation method. VIXY resets exposure daily, and holiday liquidity, market closures, macro events, and unusually high volatility can affect results. The example is therefore a starting point for research, not proof that the seasonal pattern will persist.
Key ideas
- Seasonality strategies seek recurring calendar-linked patterns in prices or returns.
- Examples include holiday rallies, weekday effects, month-end behavior, and seasonal fixed-income or volatility patterns.
- The Python example shorts VIXY from December VIX futures expiry until before Christmas and compounds daily strategy returns.
- VIXY resets its exposure daily, so its behavior may differ from a direct position in VIX futures.
- Calendar patterns can weaken or change, and the example provides limited information about costs and validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.