Buying (shorting) at the close on Thursday before expirations week if the market was down (up) and selling (covering) the Friday of expirations would have netted the following results since July 1978:
Trades – 354
Winners – 171
Losers – 182 (1 breakeven)
Average trade - -0.08%
So the overall concept doesn’t seem to hold. What if we break it out by longs and shorts?
The long signals were profitable 57% of the time for an average gain of 0.24% over 6 days.
The short signals were profitable 40% of the time for an average loss of 0.39% over 6 days.
Here we see that the short signals were actually a better buy signal that the buy signals.
Meet Mr. Douglas – the newest myth-Buster.