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.

One Year of Diversified leveraged Anchor

I almost hate to keep saying it, but the Diversified Leveraged Anchor strategy keeps exceeding expectations and performing as designed. To remind our readers, Diversified Leveraged Anchor was created in April 2020 attempting to further increase performance, reduce risk, and to reduce volatility. 

Historically diversified portfolios, over time, outperform concentrated portfolios with less risk and volatility.  The simple reason for such results is that different asset classes perform differently year to year:




Regardless of which asset you picked from the above table, in some years it would perform well comparatively and others not as well.  This volatility can be (partially) eliminated through diversification.  Simply blending large caps, small caps, and international would significantly increase a portfolio performance over time.  Numerous studies (and a simple google search) can confirm this fact.


We took this basic investment premise in 2020 and applied it to Leveraged Anchor.  Unfortunately, we know that Leveraged Anchor does not “work” well on certain instruments (such as GLD or SLV) or those with already extremely low volatility, such as government bond indexes.  Thus, we elected to use a blend of the S&P 500 (SPY), the Russell 2000 (IWM/Small Caps), Large Cap International (EFA), and Technology (QQQ).  An argument could be made against QQQ as there is some overlap between it and SPY and that both are concentrated in US Large Caps.  However, it performs well with Anchor, and demonstrated low correlation with SPY at the time it was selected.  If it and SPY become highly correlated again, we may look to substitute a high-volume REIT ETF after testing. 


One year after beginning trading, the results speak for themselves.  Here are the monthly returns for the Diversified Leveraged Anchor strategy:




All of the starting values were slightly different, as each was based upon whole contracts, with a target investment of each sector between $130,000 - $140,000.  Note these results do not include commissions.  Any one of the four sectors performance was impressive, but the blend of the four was even better.


An annual return of 57.70%, with a Sharpe ratio of 2.81, are returns no one should ever complain of – unless it was worse than just holding the underlying instruments, on a risk adjusted basis. Using published data from Morningstar, and starting with identical balances (so fractional shares were permitted), the returns of the underling ETFs over the same period were:




As can be seen, if an investor had simply put their holdings in the same ETFs, they would have only returned 43.70% -- without any hedging in place.


For a more succinct break down, over the last twelve months:


  • Leveraged Anchor on SPY returned 44.19% while SPY itself only returned 38.65% (5.54% outperformance, while being hedged)
  • Leveraged Anchor on EFA returned 40.97%, while EFA returned 37.33% (3.64% outperformance, while being hedged)
  • Leveraged Anchor on QQQ returned 55.00%, while QQQ returned 27.79% (27.21% outperformance, while being hedged)
  • Leveraged Anchor on IWM returned 90.86%, while IWM returned 71.62% (19.24% outperformance, while being hedged)
  • Diversified Leveraged Anchor returned 57.70%, while a diversified ETF returned 43.70% (14.0% outperformance, while being hedged)


In other words, Leveraged Anchor worked on all four instruments, provided excess returns in a bull market, while still protecting against large drawdowns.


Not surprisingly, the higher volatility instruments had a larger spread over the underlying instrument.  This is primarily due to the higher credits received.  We should expect the opposite to occur in extended drawdowns – which is another reason to continue to diversify.


Because of the strategy’s continued success, in the very near future we will be launching this as a fund investment, with the goal of raising substantial capital.  All Steady Options members will be given the opportunity to invest in it first, as well as to help grow the fund via a solicitor arrangement if they so desire. 


If anyone has any questions regarding the Diversified Leveraged Anchor strategy, please post your questions or email me at


Christopher Welsh is a licensed investment advisor and president of LorintineCapital, LP. He provides investment advice to clients all over the United States and around the world. Christopher has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™. Working with a CFP® professional represents the highest standard of financial planning advice. Christopher has a J.D. from the SMU Dedman School of Law, a Bachelor of Science in Computer Science, and a Bachelor of Science in Economics. Christopher is a regular contributor to the Steady Options Anchor Trades and Lorintine CapitalBlog.

Related articles


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


  • SPY Short Puts vs. Put Spreads

    In this article I’ll be using the ORATS Wheel backtesting tool to compare the performance since 2007 of SPY short puts versus short put spreads. I’ll look at both risk and returns, and different ways of determining position size to adjust for the differences in risk between the two trades.

    By Jesse,

    • 1 comment
  • Signs that you Are Ready to Start Investing

    If you want to build your wealth, you have to make sure that you invest your money. If you put money into a savings account and don’t earn any interest from it, this won’t work for you in the long term. Your money will lose value because of inflation, and this is the last thing that you need. So when do you invest?

    By Kim,

  • One Year of Diversified leveraged Anchor

    I almost hate to keep saying it, but the Diversified Leveraged Anchor strategy keeps exceeding expectations and performing as designed. To remind our readers, Diversified Leveraged Anchor was created in April 2020 attempting to further increase performance, reduce risk, and to reduce volatility. 

    By cwelsh,

  • Should I Pay Off My Mortgage Early Or Invest?

    Paying off a home mortgage early is a popular financial goal. Most people feel a level financial peace when their home is paid off that is beneficial in many ways. The most common approach to paying off the mortgage early is directly making additional principal payments to the lender on a regular basis.

    By Jesse,

  • Option Order Execution Tips

    As a community of option traders, we all can relate to the occasional challenges of order execution. Best practices for avoiding errors as well as techniques for better potential execution will be the focus of this article.  Like countless others in the Steady Options community, I personally have traded thousands of option contracts over the last decade.

    By Jesse,

  • What Trading Can Offer To A Newcomer

    For any first-time investor, one of the most important questions to ask is “why are you doing this?”. Getting into investment can be thrilling and open up new worlds for you, but it can also be draining both physically and emotionally, with long days and sudden market moves always a genuine risk.

    By Kim,

  • Updated: The Performance Gap Between Large Growth and Small Value Stocks

    Eight months ago on July 21st 2020 I posted an article, The Performance Gap Between Large Growth and Small Value Stocks. Over the long-term small cap value stocks have outperformed large cap growth stocks, although not over more recent history.

    By Jesse,

  • 6 Ways to Invest Your Money That Aren't Cash Savings

    It’s always a good idea to keep some of your money in cash so if there is an emergency and you need money in a hurry, you can access it without having to worry. However, cash savings are not your only option if you have money left over at the end of the month, and there are a lot of other options that could bring greater returns.

    By Kim,

  • Jade Lizard Options

    The jade lizard is one of those bullish spreads with limited maximum profit, and no risk on the upside. It is a combination of a short put with a short call spread . The credit this creates is higher than the span of the spread. To set this up, two actions are required:

    By Michael C. Thomsett,

  • Are Your Emotions Trying To Tell You Something?

    As a trader, you may find yourself frequently trying to ignore or rationalize emotions.  You may have even created your own “solutions” to manage them. You exit early to lock up profit and avoid a potential blow-up if the trade turns against you.

    By Jared Tendler,


  Report Article

We want to hear from you!

@cwelsh With respect to doing this strategy as a fund investment, would there not be some fund size limitation based on the available number of option contracts that could be traded. In previous posts you have mentioned opening large positions where there was little or no open interest at the entry. However, if you are the only open position (or most of the resulting open interest), would that possibly make it a problem trying to get out of the large position? You might be at the mercy of the market maker. In saying this I admit my lack of knowledge about how market makers function in these types of scenarios.

Edited by Alan

Share this comment

Link to comment
Share on other sites

So, if the fund capital increases into the billions of dollars, the liquidity would not be an issue?


Share this comment

Link to comment
Share on other sites
On 4/17/2021 at 4:32 PM, Alan said:

So, if the fund capital increases into the billions of dollars, the liquidity would not be an issue?


Alan, there is of course a limitation at some point...but a billion of assets wouldn't be it. We're aware of another firm running a similar strategy that has $1.1 billion in their fund. As assets grow, a fund could switch from trading SPY to SPX and IWM to RUT for the bigger notional contract size in order to reduce contract count. Additionally, a fund can close to new investors if capacity ever becomes an issue. 

14 hours ago, VB5 said:

Has this strategy been backtested for the past 10 years at least?

No. Chris has tested various time periods over the last 10 years, but not in full. Option strategies with multiple legs and rules are difficult to backtest in a way that would accurately reflect live trading.

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