This market is non-stop fun, isn’t it? It sure is for our Short-Term Portfolio, the same one we discussed adding more shorts to yesterday morning because the market was once again in a downward spiral gained a lovely $13,873 for the day and is now up $37,270.50 (37.2%) for the year. Unfortunately, our bullish, Long-Term Portfolio Positions fell back to $515,411, up just $15,411 for the year (3.1%) but that’s the whole point of our paired portfolio strategy – we use the STP to hedge the LTP and lock in profits on the way up.
Even better, when there is a sharp sell-off, we still have tons of cash and we’re already well-hedged so we’re ready to go shopping. In fact, the reason the LTP took a 7% hit on this sell-off is because we added a lot of bullish positions last time the maket fell (only 30 days ago), so we’re actually less hedged than we were last time, when we had fewer longs and just as many hedges (in anticipation of buying on the dip).
Hedges are insurance and YOU WILL LOSE MONEY when the market goes up – it’s like life insurance – you don’t WANT to die but, if you do, at least you get paid. We don’t WANT our hedges to pay off but, when they do, they save our portfolios – which is the whole point. Yesterday we showed you one of the primary hedges in our STP, which was the following bullish spread on the Ultra-Short Nasdaq ETF (SQQQ):
We’re still waiting to sell the Sept $3 calls for $3 or better (maybe this morning) but already we had a nice move yesterday, with the net $18,800 trade (as of yesterday, we paid $21,000) has popped to net $23,100 so the spread we showed you yesterday morning and told you was our primary hedge jumped $4,300 (23%) as the Nasdaq dropped 1.6% – THAT is how you use leverage effectively!