Market open Update (5:22pm)
The market bounced up to about 202.2 and I proceeded to add some insurance in the form of additional TLT equity AND credit spreads. I rolled down a few of my SPY short puts (from 207.5 to 204 and moved them a further two weeks out). I fully expect the market to test the December lows and subsequent 200 daily moving average in the next while. I used the bounce to better balance myself in the event of another down leg. We’re setup quite well for any directional move (up or down). As of writing this, SPY is at 201.15 so I am glad I did adjust the portfolios a bit. I was uncomfortable with SPY at 199.25 yesterday. So if it should happen to fall again, I’ll be better setup.
SPY/TLT (Feb 20th Expiry) – Credit Spread Pair Trade
205/200 SPY & 123/118 TLT
204/199 SPY & 123/118 TLT
203/198 SPY & 124/119 TLT
202/197 SPY & 125/120 TLT
201/196 SPY & 125/120 TLT
199/194 SPY & 126/121 TLT
TLT 127/121 (10% of portfolio)
SPY 199/197 Jan 30th Debit Spread (20% of portfolio)
50% TLT and 50% VNQ
NFLX Calendar spreads
GOOG Calendar spreads
Normal Protector Portfolio
Short weekly SPY Puts (instead of RSP) + Hedge
Alpha Protector Portfolio
**Secret sauce** 🙂 I use about 3-4 different things to obtain additional alpha. I don’t list them here. They’re my only secret sauce. They’re a mix of momentum picks, mechanical investing and quantitative analysis. They’ve got the same market risk in a bear or correction so our insurance will protect them.
So the volatility continued into Tuesday. The spy fell to ~199.2 from 203 and rebounded to 201 intraday only to close at ~200. Our spy TLT trade and protector portfolio is suffering a bit and I added a hedge of about 20% jan 30 debit spread and an additional bit of TLT. Overall though it’s doing well considering the huge 5 percent movement in the markets since NYE. Our momentum plays have been a godsend hedge to our protector portfolios. The entire combination of strategies has proved to be handling the decline well. It’s a bit unfortunate we had a 5 percent decline the exact day we started but hey it was a nice test and I think we’re even despite. The momentum portion is up a lot and is responsible for the result. I missed entry on one portion of the momentum picks for the month but successfully added two of three ie TLT and VNQ (I missed LQD on New Years) And those have compensated for the temporary loss on the protector and spy TLT pair portion. It is likely that we will bounce here and then see another let down probably to 197. The downward momentum is strong. However, it is also possible we have another v recovery like has been the theme as of late. Today the futures point to a bounce. They are up about 12 points on the es.
We are in Barcelona today. I’ve spent about 20 days here over all in my life and can safely say it would be the city I’d vote as my favorite place to spend time. IE I could live here more than any other city in Europe.