Calendar ETF Strategy: Capitalize on Seasonal Sector Rotation

One of the many ETF strategies you can use is the calendar strategy. The calendar strategy refers to what's commonly known as seasonal sector rotation. Sector rotation is simply the overweighting or underweighting of a particular sector in the major S&P 500 index. The calendar strategy takes a seasonal look at this sector rotation. In other words, each sector has its fundamental seasonalities that can be exploited by this ETF strategy.

How to Execute this Strategy

How does one exactly perform this seasonal calendar strategy? What you would do is find out the seasonal tendencies for each sector and perform your spread trading or overweighting and underweighting of that particular sector.

For example, retail outlets will have better than average sales during the holiday months, especially christmas. Knowing how the market should react to this fundamental fact will help you in knowing how to overweight the retail sector during or after news of retail sales comes out for the holiday months.

Another trend to look for: the price of fuel going up in the summer months. It's a fundamental fact that gas consumption is higher during this time of year, leading to higher prices. Airlines and logistics sectors would be affected most.