2011 Year To Date (System):  +13.00%

2011 Year To Date (Aggressive): +6.00%
2011 Year To Date (Actual): +3.40%

2011 Year To Date Options (Actual): +20.00%
2011 S&P:  -(6.72)%
BladeTrader Performance Against S&P: +10.12%

 

  It was an unbelievably terrible couple of weeks for stocks as the market plummeeted 20% from recent highs.  Volatility sky rocketed and individuals as well as professionals felt a 2008 meltdown redo, but this time with Europe.  The S&P plunged as low as 1080, but has since then recovered, but still hovering around 1180.  1100 held strong during regular hours but headwinds are significant, but may be priced into the recent sell-off.

This was scarry because we haven't had many sell-offs of 20% in recent memory other than the 2008 crisis and it came upon the heals of something more at home:  The debt ceiling debate.

Cooler heads prevailed this week and as the initial trend looked like institutional selling followed by individual selling, markets found their footing and caught a bid. 

The safety of a bond strategy, with the upside of a stock strategy?  Overall, the strategy is designed to take advantage of these sell-offs in one of two ways:   1) Sell Short, or 2) Stay on the sidelines.

The system caught the first part of the trend, but prices have moving so fast, its been difficult to keep up, and in the end the market moved so far away from our preferred entries (on the short side) the hedging system was the only place to make some moves.

We took the profits from our last options strategy and purchased hedges against short positions (that we could not get on fast enough).  We are expecting markets to muddle through the summer and reach 1255 by years end with a possible target of 1300.  This will give us substantial gains in our overall strategy.

 We have been trying very hard to find additional resources to monitor systems throughout the hours when the system needs updating and or modifications.  This is extremely important to the overall performance and future of our systems.

There are a couple of options: 1) continue training current individuals and have them take over fully, 2) hire off-shore overnight resources, 3) move the system to an options based system, 4) adjust the system to a fully automated system.

I prefer option #1 of course, but maybe a combination of #1 and #4 would be ideal.  Version 4.0 is an attempt at #4, but this is extremely difficult to implement and still requires monitoring, but much less than the current 3.3.1 system.  I will keep everyone posted as we move towards this and start managing accounts under one of these items. 

The #2 option is quite feasible but may make the futures system obsolete which I am not ready to commit too without serious cause. 

Overall, I am very excited about the system, its performance, and the future.  This sell off is exactly what give portfolio managers the ability to beat their benchmarks, because as I have always said "Its impossible to beat the market when it goes straight up" largely because you have to purchase insurance (PUTS, or other items) or put on plays to the downside that may turn out to move against you, but in this case, turned in our favor. This was exactly what gave us 42% returns last year, this year is a little different as I am focusing less on the returns and more on moving the system to one that is more automated and/or less labor intensive at the end of the day--this will pay off big in later years when we have far more capital at stake.