SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

How Anchor Survived the 2020 Crash


We are often asked how the Anchor strategy performed during the market crash of 2020. The monthly performance can be seen on the performance page, but it shows the End of Month values and doesn't tell the whole picture. This article will shows a detailed analysis of the Anchor portfolio during the crash.

This is how the Anchor portfolio looked like on Feb.6 2020, two weeks before the start of the decline:

image.png

SPY was at 334, total portfolio value around $143k. This is how the P/L chart looked like:

 

image.png

With 8 SPY contracts, this translates to x1.85 leverage. This setup obviously should perform very well on the upside (the portfolio should easily outperform SPY on any upside move), but the downside doesn't look that great on this P/L chart.

Lets see how things developed.
 

Feb.28 2020, SPY at 290 (down 13%), Anchor down $15k (~10%):

image.png

With SPY down 13%, the Anchor portfolio was down only 10%. This is normal and expected. The strategy is not designed to provide a total protection, especially in smaller declines. 

It is worth mentioning that the puts are typically 5% OTM when opened. It’s entirely possible for Anchor to be up 7%, then the market drops, and we end up down 12% peak to trough (or even a bit more). The Downside of Anchor discusses it in more details.


Two weeks later, March 12, SPY at 251 (down 25%), Anchor down only $4k (~3%):

image.png

Now you can see how the protection kicks in after a bigger decline.

 
Fast forward to March 19 2020, SPY at 234 (down 30%), Anchor UP $5k (~3%):

 

image.png

Now, this is pretty amazing. How this was possible?

Few factors contributed to this major outperformance:

  1. We used deep ITM calls instead of the stock. As the underlying declines, the delta of the calls decreases and they lose less value. In this case SPY declined $100, while the calls declined only $68.
     
  2. We have more long puts than short puts, so the gains of the long puts far outpace the losses of the short puts.
     
  3. During market crashes, IV jumps to the roof (in this case, VIX jumped from 16 to 80+). This caused the long puts to increase in value much more than expected. In addition, we got much more premium from the short puts when rolling.

The bottom line: in the last 30 months, the strategy produced 36.6% CAGR, significantly outperforming the S&P 500, but at the same time provided a full protection during the market crash. To me, this is as close as it gets to the holly grail of investing.
 

Related articles

Edited by Kim

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • How to Trade Cryptocurrency: A Guide for Beginners

    Trading is a core economic concept that includes the purchase and sale of assets, be it products or services, where the buyer compensates the price to the seller. In other circumstances, trading partners may want to exchange goods and other services.

    By Kim,

    • 0 comments
    • 214 views
  • The Lessons in Business We Can Apply to Investing

    While running a business and investing are two very different things, there are a number of parallels that apply to both. If you are looking to start trading and you are running a business, or vice-versa, there are some lessons that you can carry from one to the other.

    By Kim,

    • 0 comments
    • 449 views
  • 3 Methods To Invest as a Self-Employed

    As we all think about investing as a way to keep ourselves financially afloat, there is one group of people that the whole idea of trading and investing may seem more of a risk than normal. Self-employed people, who have to run their own business, trade as themselves, and essentially live a feast or famine lifestyle, could find themselves looking to invest or start trading but fall at the first hurdle because they do not have enough money or they are not able to put up with the risk. 

    By Kim,

    • 0 comments
    • 454 views
  • Steady PutWrite 2021 Year In Review

    Steady PutWrite (SPW) launched in early 2019, so we now have close to three years of performance to evaluate on both an absolute basis and relative to the strategy’s benchmark, PUTW (WisdomTree CBOE S&P 500 PutWrite Strategy Fund). 

    By Jesse,

    • 0 comments
    • 483 views
  • SteadyOptions 2021 Year In Review

    2021 marks our 10th year as a public trading service. It was our best year since inception. We closed 192 winners out of 270 trades (71.1% winning ratio). Our model portfolio produced 201.0% compounded gain on the whole account based on 10% allocation per trade. We had only one losing month in 2021. 

    By Kim,

    • 0 comments
    • 1,219 views
  • Results of Trading Industry Survey

    Earlier today I distributed a press release with the results from the Trading Industry Survey we conducted in November. First off, I want to thank all of you who took the time to complete the survey. I greatly appreciate your participation and, as you’ll soon see, the results were intriguing.

    By Jared Tendler,

    • 0 comments
    • 1,470 views
  • Questions to Ask Yourself Before You Start Investing

    Everyone has heard the success stories of people making tons of money from investments, retiring early, and living a life of luxury. But, before you start tying up all your cash in investments, it is crucial to understand more about what is involved.

    By Kim,

    • 0 comments
    • 1,613 views
  • How To Use Tech To Improve Your Stock Trading

    Technology is undoubtedly helpful in many aspects, and stock trading is no exception. Over the years, the stock trading market has experienced improvements as a result of leveraging technology. For instance, stock traders can have faster access to more comprehensive data to help them make a more informed decision.

    By Kim,

    • 0 comments
    • 1,688 views
  • Exploiting Earnings Associated Rising Volatility

    It was brought to my attention that Seeking Alpha now restricts the number of articles people can read for free, so I will reprint few of the key articles I wrote for SA. This one was my fist article, written in 2011, and it gives an introduction of the earnings straddle strategy that we have been using for the last 10 years with great success.

    By Kim,

    • 0 comments
    • 1,962 views
  • Why And How To Trade Objectively And Keep Your Emotions In Check

    Trading on the stock market is a serious profession. Individuals can make a very lucrative return whether trading professionally or personally. To successfully trade on the stock market it requires years of dedication, practice and thorough market understanding.

    By Kim,

    • 0 comments
    • 2,352 views

  Report Article

We want to hear from you!


What's your take on using similar strategy on high risk stocks (e.g. Tesla)? risk can be limited and reward would not be compromised. It would be great to see how it behaves on individual stocks. 

Share this comment


Link to comment
Share on other sites

We had a very detailed discussion on this on the Anchor forums.

The short answer is that it won't work because the hedge would be too expensive. 

Share this comment


Link to comment
Share on other sites


Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs Expertido