Checking in on Alternatives to Sell in May

Back in April I took a look at alternatives to the old ‘sell in May and go away’ strategy.   Over the course of three blogs I compared receiving a six month return by going to cash with three different strategy indexes compiled and published by CBOE. The three blogs discussing the three alternatives may be found through the links below –

CBOE S&P 500 BuyWrite Index (BXM)

CBOE S&P 500 2% OTM BuyWrite Index (BXY)

CBOE S&P 500 PutWrite Index (PUT)

There was a slight change to the old sell in May rules with that change involving going to cash at April expiration and going back into the market at October expiration. Since each of the strategy indexes listed above are rebalanced on those dates it made sense to compare BXM, BXY, and PUT to going to cash based on those dates. So now that we are a little past October expiration I wanted to check in on performance gained from holding cash (in the form of a six month CD), the S&P 500’s total return and the returns for each of the respective strategy indexes. The results show up in the table below –

Sell in May

Some years things work and other years they do not. This is one of those years that sell in May would not have worked too well. From April expiration to October expiration the total return for a market (S&P 500) portfolio was just over 2% while a six month CD would have yielded 0.4%. The strategy indexes were all down slightly so even cash would have done a little better than BXM, BXY, or PUT. Come April I’ll be checking in again on this and watch over the summer to see if the strategy indexes can regain their luster as a substitute for the ‘go away’ part of ‘sell in May and go away’.