What a great month it's been!
Like the Fed, we've made very few adjustments to our portfolio but the ones we have made have been very effective and, more importantly, we added a lot of hedges that locked in our gains at very near our highest levels (45%) and we were relatively unaffected by this week's weak action. We started the portfolio on August 8th as an experiment with the people at Seeking Alpha to see if we could create a fully documented portfolio that makes a steady 5% monthly return. We failed to do that.
Though we are up just about 45% in our 9th month, the returns have been far from steady. As it turns out, our Butterfly Portfolio (one of the 4 virtual portfolios we use over at PSW) is still the champ and, to that end, we are incorporating more of those long, boring plays into the OOP from now on – as the goal was to have a low-risk $100,000 portfolio. The mistake we made was trying to make 5% in our first month, which we did but we were over-exposed when the market dove – bad timing as our first month coincided with a huge market drop that lasted through September.
Nonetheless, we got back on our horse and followed our "Be the House – NOT the Gambler" strategy and made a lot of smart bets and got ourselves back on track. Actually, this is a good time for a strategy note. Over at Philstockworld, we have an Education and Strategy section where we discuss our methods of scaling in and out of positions (something I also teach in our Live Trading Webinars) and it would be very educational for you to review our Options Opportunity Portfolio – 2016 Preview, which details each of our positions at the time and how much money we expected to make from each one. Although the BALANCE of the portfolio was just $101,571 at the time, the key quote was this:
Notice first that we have $98,672 worth of cash on hand. We started with $100,000 and, using just $1,328 of our