I cannot believe that January is over. And it was a horrible month for our Hfea Strategy. The HFEA lost ground amidst the selloff. I think it was a rare occurrence as our TMF protection was not protecting the SPXL holdings at all. Both leveraged ETFs were losing money. Shouldn’t TMF (bonds) be going up during market selloff? It didn’t go up this time. That indicates investors were fleeing from bonds too.
Originally, I dedicated $15,000 for this strategy. That represented approx. 15% of our portfolio. If the strategy underperforms and is below this amount, I will add cash to it. If it outperforms and ends above this threshold, I will trim the position and save the cash aside. We will be rebalancing quarterly and our next rebalancing will occur in March 2022.
The HFEA strategy is about investing in leveraged ETF but adding protection to the downside since the leverage works both ways. I like the idea because drawdowns can be significant.
Initial HFEA allocation
Start date: 11/27/21
Approach: Variable allocation* – 45%/55% SPXL/TMF
Rebalancing frequency: Quarterly*
Return (total / YTD): -6.87%/-6.87%
Initial contribution: 15% of portfolio Net-Liq (~ $15k)
* Variable allocation will be adjusted based on the moving averages and VIX term structure. When moving averages turn negative (downside) and VIX turns into backwardation, the SPXL allocation will be decreased and TMF allocation increased.
Current HFEA allocation
Approach: 45% SPXL, 55% TMF
| MONTH | NET-LIQ | PROFIT/ LOSS |
PROFIT/ LOSS %% |
| November 2021 | $13,441.91 | $0.00 | 0.00% |
| December 2021 | $14,773.72 | $1,331.81 | 9.91% |
| January 2022 | $12,597.96 | -$2,175.76 | -14.73% |
Our HFEA strategy lost -14.73% in January 2022 while the entire market lost -6.95%.
HFEA charts
Strategy Net liquidation value
Strategy vs SPY Net liquidation value
Strategy performance vs. SPY
The markets may be finding support at the current levels ($4,315). If we are seeing a bottom and reversal, the strategy should start performing well from now on. Let’s see what February brings.
This post first appeared on Investing Into Stocks - Hello Suckers!, please read the originial post: here
