Holidays and Weekends in the US Stock Market: Features and Risk Management

Holidays and Weekends in the US Stock Market: Features and Risk Management

Introduction

Holidays and weekends have a significant impact on US stock exchanges. During these periods, the market operates under altered conditions: liquidity decreases, trading accessibility is limited, and investor behavior becomes less predictable. For traders, this can mean both increased risks and new opportunities. In this article, we will examine how these days affect the market, what financial costs may arise, and how to effectively manage risks.

Calendar of Non-Trading Days on US Stock Exchanges

US stock exchanges do not operate on certain official holidays. Legislation defines these days as holidays for federal institutions, meaning that trading on exchanges does not take place. These include:

• January 1 – New Year’s Day
• Third Monday of January – Martin Luther King Jr. Day
• Third Monday of February – Presidents' Day
• Good Friday – before Easter
• Last Monday of May – Memorial Day
• June 19 – Juneteenth National Independence Day
• July 4 – Independence Day
• First Monday of September – Labor Day
• Fourth Thursday of November – Thanksgiving Day
• December 25 – Christmas Day

Financial Costs of Holding Positions During Holidays and Weekends

Short Positions

Short positions involve borrowing stocks to sell them, which comes with a daily fee. Since market settlements follow the T+2 scheme (ownership transfer occurs two days later), the holding fee for weekends and holidays can be significantly higher.

The calculation formula: the daily fee equals the rate divided by 100 and 360, multiplied by the position value. For example, at a 30 percent rate for a $100,000 position, the fee for one day would be approximately $83.33.

• Regular day: The fee for a $100,000 position at a 30 percent rate is $83.33 per day.
• Position opened on Wednesday: If the market closes for the weekend, the fee is charged for 3 days, meaning 83.33 multiplied by 3 equals $250.
• Holiday Monday: If the position is opened on Wednesday, the fee may increase to 4 days, meaning 83.33 multiplied by 4 equals $333.33.
• Holiday Friday: A similar situation occurs when a position is held from Tuesday to Monday.

Long Positions

Holding long positions may involve using margin funds, which incur interest charges. For example, when purchasing 100 shares at $15 each (totaling $1,500) with an annual margin rate of 8 percent:

• Daily fee: 1500 multiplied by 8, divided by 100 and 365, equals approximately $0.33.
• Annual fee: Around $120.

The key difference between short and long positions is that short positions incur a daily borrowing fee that may increase on holidays, whereas long positions have relatively stable interest costs.

Risk Management Strategies During Holidays and Weekends

During holidays, the market behaves differently: liquidity decreases, spreads widen, and price movements can become more erratic. To minimize risks:

• Plan ahead. Check the calendar of non-trading days and adjust your positions accordingly.
• Communicate with your broker. Understand the fee policies, especially for short positions.
• Use stop orders. This helps automatically close a position in case of sudden market changes.
• Avoid unnecessary costs. If possible, refrain from holding positions through long weekends.

Conclusion

On holidays, the market practically comes to a halt: liquidity drops to a minimum, and opening or closing positions is not possible. This creates both risks and opportunities. Traders should carefully plan their positions, monitor fees, and avoid unforeseen expenses. Understanding how the market operates during these periods will help effectively manage investments and minimize risks.