TLT continues to wreak some havoc on some of the portfolio. TLT fell another 1.5% reaching a critical support line. It’s fallen 10% this month. Just 9 trading hours ago TLT was around 131 and our SPY/TLT pair trade was negative but still OK. Now the TLT/SPY pair trade is down over 20% and our momentum trade is just above break even for the year. TLT rose 9.9% in January only to fall the same in February. Quite volatile for Long term treasuries.
The 10 year yield is up 50 bps this month and if it ended here today it’d be the largest 1-month increase since 2009 (Dec). We should hopefully see support on the B line above.
Frustrating that through the last 6 weeks we’ve navigated well despite a volatile environment and were profitable in month 1 only to be quite affected in month 2 by a pretty large and RARE drawdown in TLT (10% in 15 days?) Bonds? Really? Anyways, I digress, we’ll see how the month ends. The accounts are up but they’d be up a ton more if we didn’t have this insane 15 day relentless fall in treasuries. Not only that, I personally just got out of watching my US equivalent balance collapse because of the EURO (I keep about 1/3rd in EU because I live in EU). Always something 🙂
Any positive news? The protector portfolios are doing well, especially the alpha portion. Fucking love this hedged portfolio. It’s truly brilliant. I get tempted to just do this and some MIC and cut the other bull shit. I especially love the use of the alpha quant signals and the results it brings.
I am not sold that the SPY/TLT correlation will remain as it was for the past 5 years (which we back tested). We’ve had a 30 year bond bull market and treasury rates are very low (I know in EU some are negative) but I just don’t ‘trust’ in the strategy as a main element of the portfolio and I don’t trust that US rates will necessarily drop. I don’t trust the correlation is present in all market types and I don’t trust that the correlation has to continue. Though the backtests for the last 5 years are fantastic, I want (and have) downsized the allocation. This month I did about 1/3rd the amount.
I’ve re-analyzed the old annoying MIC (modified iron condors) trade and have added a small amount earlier this month, it’s doing v. well. I’ve changed the adjustment parameters and have set it to be strictly non-discretionary and alert based. I am comfortable with it, especially with proper sizing and I’ve rethought how to handle the upside risks. This method produces a 97% win rate (anything above 0%) with an average of 3% per month with a max loss of 7%. It works in any market type. I swore away from getting back into it, but it’s sort of like home for me. I’ve got so much experience running the things albeit I ran it very discretionary which causes an insane amount of stress. The only way to run it is with proper position sizing within the portfolio and with alerts and a proper trading plan. No discretion. So far I’ve got one alert this month, loaded up the application, adjusted my debit spreads. That was that. No thoughts, no checking, no discretion.