Don’t celebrate just yet …
Every December 31, most traders are already half checked out.
They’re rushing home to change into an outfit for a New Year’s party or making a last minute liquor store run.
Don’t fall for the rush!
Traders who leave the market early don’t have anything to celebrate.
Because as everyone’s attention shifts to trading on January 2 … A cyclical trade is already developing that promises to help us start 2026 with a bang.
I’m talking about one of the most reliable setups of the year: A huge inefficiency that leads straight into the January Effect.
Behind the scenes right now, institutional players like hedge funds and mutual funds are cleaning up their books before the year closes.
It’s the same inefficiency that’s shown up for decades. And yet, most traders miss it because they’re already in party mode.
Don’t make the same mistake.
While everyone else is preparing to party, smart traders are locking in entries that will define the first week of 2026.
Finish strong. Stay disciplined. And when the market reopens on Friday, January 2, you’ll have a reason to celebrate all over again.
January Effect Opportunities
Every trader has heard of the January Effect, but few understand the real reason it happens or how to trade it.
It all starts with institutional players.
At the end of every year, hedge funds and mutual funds clean up their books.
They’re dumping losers to lock in tax losses, and buying up winners to “window dress” their portfolios for those glossy year-end reports.
To the public, it looks like real strength from the winners and extreme weakness from the laggards.
But under the surface, it’s about polishing their appearances. There’s less support from the actual fundamentals.
The result is artificial and exaggerated price swings in both directions.
Losers are oversold as institutions rush to sell before the year closes. Winners are overbought as money managers pile in to make their holdings look stronger than they are.
Traders like myself, we wait for these setups all December.
This violent and emotional momentum hits in the first few trading sessions of the new year, and it’s especially acute into the close on December 31.
This is a market cycle that’s born from human behavior: Greed, fear, and the endless pressure to look good on paper in front of investors.
We can take advantage of this volatility. And our first opportunity is this afternoon.
December 31 Trades
This is it. The final few hours of 2025.
This is when the best setups of the year start flashing across our screens.
If you’ve been watching closely, you already know what to look for. Stocks lighting up our scanners, moving in spectacular fashion on both ends of the tape.
The biggest winners of the year pushing even higher. The ugliest losers getting dumped one last time.
That’s where the opportunity lives. And remember: We can trade both sides of this momentum.
With options contracts, we can buy calls for long-biased setups and puts for short-biased setups. No need to risk short selling.
Plus, there’s one more factor that helps stocks explode into the new year …
As I mentioned, most traders are checked out this afternoon, already celebrating. They’ll come flooding back into the market on Friday and again on Monday.
They’ll pile into the strongest stocks that ran without them. And the buying pressure will grow even larger.
That’s the inefficiency we exploit every year. We’re already one step ahead of the crowd.
Stay sharp into the close. Don’t log off early. This is one of the best edge plays of the entire year.
Use My Process To Trade These Setups!
Stay Street Smart,
Jeff Zananiri
