The stock Market is tanking, which takes a toll on our Strategy. We are down again. But this time, the strategy only lost the previous gains, and we are on par with the stock market. I will keep adding to the position as the market goes lower. When we recover, the SPXL will recover faster, and the strategy will outperform.
Initially, I dedicated $15,000 to this strategy. That represented approx. 15% of our portfolio. When the SPXL underperforms the market and my position goes down and is below my cost basis (my position is in red), I add new shares to my portfolio. I deposit cash and buy shares. Once this bear market ends, and trust me, it will, as no bear market lasts forever, I will stop buying new shares but trim the position and save cash from selling for the next bear market. This is a standard balancing approach. Keep my position at about 15% of my main portfolio. When it moves to 20% (or more), I sell enough to bring the position back down to 15%. If it moves down to 10%, I will buy enough to bring it back to 15%, and so on.
In today’s bearish market, I am adding new cash and buying. Even though it is hurting my net-liq short term.
Our HFEA strategy lost value in September 2022 by -22.07% while the entire market lost -8.94%. Overall, the HFEA portfolio is down -22.22% while the entire market is down -21.23%. I think that is not a bad result, considering how leveraged the SPXL is. I expect the strategy to be lower, so I am pleased with this result.
Strategy Net liquidation value
Strategy vs SPY Net liquidation value
Strategy performance vs. SPY
September 2022 was not a good month for this strategy as the SPXL lost significant value (remember, the leveraged ETFs work both ways – they go up 3 times, but they also go down 3 times).