Once again, our ETF Extremes strategy proved that patience pays. The strategy has only been exposed to the market for 38 out of 236 trading days so far this year or 16.1% of all tradable days. This is an amazing statistic considering most investors think that they need to trade or be exposed to the market on a daily basis to be successful.
A trade was signaled in our ETF Extremes strategy on Wednesday 12/6. The quick rise in the S&P last week has brought our indicators into an “extreme” state which triggered an alert in the strategy. At the time SPY was in an overbought state and our proprietary stochastic indicator was at an extreme state as well. When both of these indicators are in this type of territory the probability of a short-term move lower is high.
As a result we issued the following trade alert to our participating subscribers: Buy to Open SPY Feb07 143 Puts (SFBNM) for $3.10.
Much like our last two trades in the ETF Extremes, we were anticipating a sharp move lower shortly after the alert was sent. The market traded sideways for remainder of the trading day so obviously we decided to hold onto our position. The market finally moved slightly lower Thursday and as a result of the move lower, we were able to close the position for $3.30 or a 6.5% profit on the trade. By staying diligent and sticking with our guidelines we have had a 100% win ratio (10 out of 10 winning trades) YTD for a total YTD return of 47.5%.
Ahead of Friday’s release of the non-farm payrolls we decided it was best to take a profit off the table. The market can be extremely volatile and unpredictable once this data is released and because of that we wish not to take any unnecessary risks and would prefer to take the position off for a small profit.
Obviously we are pleased with the win ratio, but we are realists. We realize there is no holy grail in trading. One thing we do know for certain is that we have found a rare, unique, and concrete opportunity that makes the world of sense to us and we trade it to make serious money over the long-term. Furthermore, we realize that the less we trade, the better the strategy will do in the long run. And the long run is what matters. This is what makes our
ETF Extremes
strategy unique and so far, successful. Hopefully, we can continue our winning ways and extend the gains going forward.
Patience is the key ingredient to the success of this strategy and forcing a trade is, in most cases, detrimental to any strategy. Our exact words on the site are as follows: “This strategy requires patience coupled with a disciplined approach. The strategy will make approximately, on average 1 to 3 recommendations a month with holding periods of 1 to 15 days, however; there will be some months when no recommendations are made. The key to this strategy is patience. Waiting for the appropriate scenario to recommend trades with a high probability of success is what makes this strategy a success.”
Furthermore, we do know that with our money management and capital preservation techniques this strategy will be extremely profitable over the long-term. Our stop loss is usually set at $.35 per trade so it would take quite a few losing trades to move this strategy into negative territory. With a total YTD return of 47.5% we continue to be extremely enthused about the strategy. The combination of our two strategies, Gap Fade and ETF Extremes, has led to total YTD return of 25.6%.
Our returns are based on the baseline model (fixed number of contracts) because we believe reporting on cash basis is a more straight-forward and transparent method of reporting returns. Performance will vary depending on what % per trade you choose with your particular brokerage.
Performance will vary depending on what % per trade you choose with your particular brokerage.
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Kindest regards,
Andrew Crowder
Chief Options Strategist
Crowder Investment Research, LLC
www.crowderinvestments.com