The equities market made headlines through 2013 as it reached new all-time highs. However, shortly after 2014 began fears about a crisis in the emerging markets spike and caused the start of a selloff. This saw the S&P fall from an intraday high of 1850.84 in January to a low of 1737.92 on February 5th. Following this fears dissipated and the market began to recover.
During that recovery a key technical event signalled a buying opportunity. A sub-zero, bullish MACD crossover has been followed by a quick rally each time it has occurred in the last 12 months. So, when it happened this time we were poised to take action and open a long position on the S&P 500. To gain increase upside potential over an outright buy position, we decided to purchase $205 Jan ’15 calls as soon as the crossover took place.
When it did, on February 12th, we signalled to our clients that we had allocated 5% of our portfolio to said calls at an entry price of $1.37. This gave us long exposure to the upcoming rally while ensuring that our risk was limited to just the funds invested in the trade.
Our signal proved accurate as the S&P rallied back to its pre-emerging market highs. However, we soon saw that it would be prudent to exit the position as the situation in the Ukraine worsened. Although the market had not reacted poorly to the news, there was a significant and increasing risk that we would be facing another emerging market like panic, and that we would see another selloff in equities. Thus, to ensure that our risk was prudently managed, we closed the trade on March 3rd for a profit of 20.44% in only 19 days!
Our first winner of 2014 marks an ongoing streak of 32 closed trades without a single loss. A streak that spans across 3 different years for 98.59% in profits. Outside of this streak we have closed 89.66% of our trades for a profit, gaining an average of 31.14% per trade. This has brought our overall returns since inception to a massive 872.77%! This gives an annualised return of 62.65% a year. If your performance has not beaten ours, or you would simply like to know the methods we have used to generate our returns while keeping our risk in check, then you can! All you have to do is become an SK OptionTrader client by signing up below.
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