In one of my previous posts, I have shown how investors can hedge their portfolios and be better prepared for the potential market decline. In brief, the main purpose of hedging is to reduce investment risk and lock in profits by taking an offsetting position in a second instrument, such as options and futures, or by selling-short. While this sounds pretty intuitive and easy to do, in fact, the technique can be hard to implement without having an extensive investment knowledge, especially in derivatives.
There is an old trading adage that says “Sell in May and go away.” According to it, investors should close all equity positions in May, go to cash and get back into the market in November, thus avoiding a seasonal decline during summer and the first part of fall. However, the last three May months that still reside in my memory were profitable, obviously questioning if this concept is still valid. [Read more…] about Sell in June and Go Away?