27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
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One of the most followed portfolios on Scott's Investments is the ETF Replay Portfolio, or Relative Strength Portfolio, which I typically update around the 1st of the month. However, as I have previously noted, the portfolio can be updated or rebalanced at any point so given the recent market volatility now is a good time to check in on the strategy.
The strategy is to buy the top 2 ranked ETFs based on the weighting of the 6 and 3 month returns and 3 month volatility (what I call the "6/3/3" strategy) as well as the top 2 ranked ETFs based on the weighting of the 3 month and 20 day returns and 20 day volatility ("3/20/20"). If there are duplicates in the top 2, then the strategy purchases the third ranked ETF in the 3/20/20 strategy and, if necessary, the third ranked in the 6/3/3 strategy. In other words, the portfolio always holds 4 ETFs.
At the beginning of March, the portfolio called for the following holdings:
XLE U.S. Energy Sector SPDR
DBC PowerShares DB Commodity Index
VNQ Vanguard Morgan Stanley REIT
DBA PowerShares DB Agricultural Commodities
As of today's close the strategy, if one were to choose to re-balance today, calls for holding:
TIP iShares Barclays TIPS
WIP SPDR Int'l Gov't Inflation-Protected Bond
DBC PowerShares DB Commodity Index
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DBC and XLE are the picks for the 6/3/3 strategy, so the longer term trend is still in favor of commodities and energy. However, the shorter term trend has shifted to inflation protected bonds, both in the US and internationally. Clearly, a portfolio of the 4 ETFs above are heavily protected against future inflation as was the portfolio at the beginning of the month.
How does re-balancing the portfolio semi-monthly backtest? In recent years both the 6/3/3 and 3/20/20 strategy have far outperformed SPY (S&P 500). The returns below are for holding the top 2 ETF in each strategy since 2007 and re-balancing semi-monthly. Note that returns exclude commissions and taxes:
6/3/3:
3/20/20
I will continue to update the portfolio monthly at Scott's Investments. If you enjoy this type of free content, do me a favor and leave me a review at Investimonials!
No positions
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.