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

  • Things To Think About Before Getting Involved In Investing

    There are various benefits associated with investing. It can be a great way to boost your income, providing you with financial security during a troubling time. Smart investing also comes with the possibility of long-term returns, meaning it can be better to invest your money than leave it in your regular bank account (even if you are earning interest). 

    By Kim,

    • 0 comments
    • 162 views
  • Micron Technology (MU) Earnings Report June 30, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade. Read on or watch the video overview here: https://youtu.be/IDgR3FzONnI.

    By ORATS_Matt,

    • 0 comments
    • 221 views
  • Does “Managing Winners” Add Value to Short Strangles?

    Some option educators suggest short strangles have historically benefited from actively managed exit strategies. A widely popularized approach is to enter S&P 500 strangles at 45 DTE and exit at 50% of the credit received or a 21 DTE time stop, whichever occurs first.

    By Jesse,

    • 2 comments
    • 4,700 views
  • NKE Earnings Report June 27, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade. Read on or watch the video overview here: https://youtu.be/2mtx2ja-VwQ.

    By ORATS_Matt,

    • 0 comments
    • 231 views
  • KBH Earnings Report June 22, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade.

    Read on or watch here:

    By ORATS_Matt,

    • 0 comments
    • 296 views
  • Know How To Trade Before Making An Investment

    Everyone is searching for a way to improve their living quality. Plenty of scopes are coming to the forefront and people are grabbing the opportunities with the hope of receiving the best revenue against their investment. A share market is a place that can return the high revenue of your investment.

    By Kim,

    • 0 comments
    • 317 views
  • Implied Volatility and Standard Deviation

    1. Isn't holding a naked long call (as a result of locking in a profit or plain buying outright call) in general a bad idea? Reason I think so is because of the nature of IV: it mostly falls when the underlying is rising. So you have short theta and a big long vega moving against you.

    By Mark Wolfinger,

    • 0 comments
    • 295 views
  • Introducing a "Risk Free" Trade

    A few weeks ago, I got the following email from one of our former members: "I would like to share with you an article about "projected no risk trades" or "no risk trades". Of course I was skeptical. But when he shared the setup with me, I became intrigued. How does the following risk profile look to you?

    By Kim,

    • 6 comments
    • 1,390 views
  • What You Trade Matters

    Traders love to tell people that they can trade anything. That if you have the skills to be a trader, the specific item traded is unimportant. That may be true for some professional traders who are skilled technicians. However, it’s very different for gullible amateurs.

    By Mark Wolfinger,

    • 0 comments
    • 631 views
  • The Big Loss

    At his blog, Joey offers his perspective on the top reason that so many trader wannabes are not, and will not, become profitable traders. His post is titled: Learn to Lose Money to Make Money. Here are the Excerpts from the blog.

    By Mark Wolfinger,

    • 0 comments
    • 821 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