We previously studied the concept of combining the strategies ofand managing early (exiting at 21 ) in a series of Market Measures on . That was inspired by a series on applying the combined strategies to . Today’s study examines the strategy applied to . Shorting Puts is a bullish strategy and this has been a bull market. We went back far enough though to include the financial panic of 2008-2009 so our study period was more balanced. Will shorting Puts combined with managing winners and managing early outperform buy-and-hold, and if so, by how much?
Our study was conducted in a $1 million dollar margin account in the SPY using data from 2005 to the present. We chose the optionsclosest to 45 DTE. We sold the 1 / 16 Put. We opened a new position only after closing the old one. A short Put strategy works well in Bull markets but obviously has downside risk. The risk is mitigated by the received.
An 11 year results graph compared a buy-and-hold S&P strategy to managing earlier, managing winners and a combination of the two. The graph showed that the combination of strategies nearly doubled the profits of a passive approach. Tom noted that ”the real takeaway was how small the drawdowns were with the combined approach and the relatively low portfolio.”
For more information on Portfolio Allocation see:
Market Measures from October 10, 2016:
Market Measures from October 14, 2016,
Market Measures from October 20, 2016:
Market Measures from October 27, 2016:
Watch this segment of Market Measures withand for the valuable takeaways and the results of our study on portfolio allocation when using a strategy of shorting Puts.