I rarely post on WSB so many of you have basically no reason to trust me but I have traded for a long time and I felt this one is worth sharing. The current probability on Robinhood’s prediction markets for 7k+ close for the year on SPX is about 17%. “The santa clause rally” refers to the last 5 trading days of December and the first two days of January. During this time since the 1950s SPX has finished green around 80% of the time with an average return of 130bps. You couple this with the fact that SPX just broke an ATH, which if you are a trader and don’t know this, more often than not results in a continuation in a uptrend in the short term.
There is no macro for next week that should impact the trend, yet despite what I mentioned prior, Robinhood traders are slapping it with a 17% probability over 3 trading days for SPX to gain 100bps.
My plan isn’t to hold into the year end close, but to flip these as the return on a 50bps rise would likely net me much more than a 1% OTM option for the same expiration. On top of this, event contracts follow the 60/40 rule meaning 60% of capital gains are automatically taxed as long term, 40% short term, regardless of holding period.
Anyways regards, might be worth a look.
