Is The Stock Market Closed on Christmas Eve?
In short, yes. US-based stock exchanges close at 1pm Eastern Time on Tuesday, December 24th.
Christmas Holiday Hours
US-based stock exchanges close at 1pm Eastern Time on Tuesday, December 24th - Christmas Eve. These exchanges will remain closed for the full day of Wednesday, December 25th - Christmas Day. You can expect slow trading for the entire week around Christmas with some strange trading around the New Year.
How will the holidays affect trading?
You can expect volume to be extra low the week of Christmas as investors and traders take their eyes off of the markets for the week to spend time with their families. This low volume will lead to low volatility in the market and not many reliable moves to catch profits from. Trading will be extra slow on the 24th because of the half-day. Think about it, trading will be super slow on Tuesday with no trading on Wednesday. Who would go to work for just one day (Monday) then take two days off and go back to work for just two slow days before the weekend? From this perspective, you can understand why the whole week will be slow.
Not to mention wash sales. A wash sale is where institutions and retail traders close losing positions just before the end of the year then buy them back at the beginning of the next year to maximize tax benefits by deducting a capital loss (you only pay capital gains taxes on realized gains, ie. closed positions). The IRS uses the wash-sale rule to minimize this incentive which prevents the reporting of a capital loss on sales where a similar/identical security is purchased within 30 days after the sale. Many traders work around this by applying the capital loss to the cost basis of the follow-up purchase instead. The cost basis of a stock is the dollar amount of the investment made or the per-share cost of a security plus commissions and fees. This idea can be combined with the wash sale idea to where traders sell a majority of their positions at the end of the year (the ones they think won't move much around January 1) to result in earning capital gains and then reinvest the capital gains into the same holdings at the beginning of the following year to raise the cost basis of the original investment.
For example, if Investor A buys 100 shares of stock XYZ at $99 in 2019 and sells it at $100 at the end of 2019, Investor A made $1/share. Instead of taking this capital gain as cash profit, Investor A reinvests the money back into stock XYZ. Investor A's cost basis is now $100/share (instead of $99/share), which can be used for reporting next year's capital gains without having to pay taxes for last year's capital gains because they were reinvested in a wash-sale and not taken as an actual profit. Now, if stock XYZ rises up to $101/share in 2020, Investor A will still only make $1/share to report for capital gains rather than $2/share if they had held the investment from the very beginning. That could be twice as much paid in taxes!
In short, there ends up being a lot of weird price action at the end of the year and beginning of the following year due to wash sales and low volume trading so take some time off and enjoy the holidays!
The Inlight Team
Thanks for reading this post! As an exclusive to you, have 50% off of an Inlight Mentorship before prices increase in 2020! (That's just $500 for 90-days of mentorship instead of $2000!!)Apply Now! (Save $1500)