This article was originally published on ETFTrends.com.
ETF investors may have to buckle up as the month of October, or also known as "the jinx month," has been marked by some historic crashes and other volatile markets.
According to the Stock Trader’s Almanac, October is the “the jinx month” because of the number of major selloffs that occurred in the past for the month, reports Ryan Vlastelica for MarketWatch.
The Almanac recorded “crashes in 1929 and 1987,” along with “the 554-point drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989, and the meltdown in 2008.”
Historically, the Dow Jones Industrial Average returned an average 0.6% over October, which has made it the seventh-best month of the year. In the past 67 years, October has been positive for the blue-chip average 40 times and negative in 27 times.
The S&P 500 typically added 0.9% over October, which is also good enough for seventh place, with the same ratio of positive October months to negative ones as the Dow.
Meanwhile, the Nasdaq Composite Index's October was historically the eighth-best month of the year, going back 46 years. The index historically gained 0.7% over the month and was positive 25 of the past 46 years.
Consequently, investors who are seeking a hedge against further weakness in the markets may turn to alternative ETF strategies. For instance, the ProShares Short Dow 30 ETF (DOG) , ProShares UltraShort Dow 30 ETF (DXD) and ProShares UltraPro Short Dow 30 (SDOW) can a bearish position on the Dow. Jones Industrial Average.
For those who were wary of a potential pullback in the S&P 500 index, traders can look to the ProShares Short S&P500 (SH) , ProShares UltraShort S&P500 ETF (SDS) , Direxion Daily S&P 500 Bear 3x Shares (SPXS) and ProShares UltraPro Short S&P 500 ETF (SPXU) .
Lastly, investors can also hedged against a dipping Nasdaq through bearish options as well, such as ProShares Short QQQ ETF (PSQ) , ProShares UltraShort QQQ ETF (QID) and ProShares UltraPro Short QQQ ETF (SQQQ) .
In a potential sign of positive trends ahead, the Almanac revealed that midterm years tend to correspond with extremely strong Octobers, with the Dow returning an average 3.1% in mid-term years for the month, the S&P rising 3.3% and the Nasdaq surging 4.2%.
However, investors may have to be prepared for more swings. October has been historically the most volatile month of the year as measured by the standard deviation for major indices. Since 1896 when the Dow was created, the standard deviation of the Dow’s daily changes has been 1.44% for every October, compared to 1.05% for all the other months.
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