Thoughts of a mechanical engineer turned programmer turned statistical investor. Here to save you from making mistakes I made at the beginning of my investing career.

November 9% Nasdaq – year end portfolio review

Although it may not feel like it, the nasdaq went up 9% in the last month:

Its still down 28% on the year, but at its lowest this year it was down 34% (!).

My portfolio is doing a lot better, showing -3.8% for the year, but still red for the year unfortunately:

Honestly I don’t have a ton to update, I just realized I haven’t posted an update in over a month so I figured now would be a good time to do a portfolio review for the end of the year.

In terms of trades, I have been trading a bit and consolidating my portfolio. I currently stand at 47% invested, so still cash heavy and cautious. Almost all my positions are 2 year out short puts, with a couple shorter term double covered bear put spreads. I closed all my previous call butterfly positions at the relevant times. I also have been playing a VIX hedge, which is just a bull call spread on the VIX, so if the volatility goes up (market goes down), I’ll make money on the BCS (and I can realize profits and wait for it to go back down to rinse and repeat while waiting for the rest of my positions time premium to decay), and if the VIX goes down, I’ll make a bunch of money on the rest of my positions.

Currently my short positions are worth 211,000$, so if they all expire worthless in the next 2 years, thats the amount of money my portfolio will gain. Just for easy calculations, on a ~500k$ portfolio, $200k/2 years = 100k$/year = 20%/year to gain from where I am today (which is 4% red). So 20% is my best case scenario where all my positions expire worthless as they are, which is granted unlikely, although lets go over them and have a look:

AAPL – All positions on track to expire worthless

ADBE – On track

AMZN – the short term DC-BPS on track to expire. The 2 year short puts are not currently on track to expire worthless, but of the 32$ they are currently worth, only 5$ is currently intrinsic value, so 27$ worth will expire even if AMZN doesn’t got up at all in the next 2 years. So lets take 20k$ off of my potential.

FDX – on track

GBTC – lets just write this off as worthless.

GOLD – This is a bit of a long shot, let write it off as not going to expire so lets take 13k$ off of my potential.

GOOG – on track

HD – On track

ICCM – lets write this off as a loss

JETS – 1.25$ of intrinsic value so lets take 1250$ off my potential

KKR – on track

META – 6.5$ of intrinsic, so lets take off another 1300$ from the potential.

MTCH – this is a bit of a long shot as well, currently worth 25$ with 22$ of that intrinsic, lets write it off and remove another 25k$ from the potential.

SPWR – on track

T – on track

TGT – on track

TSLA – on track

V – on track

VIX – my hedge.

So summarizing, out of the 211$ potential initially calculated, 131k$ is currently “on track” to expire, which means that even if the nasdaq stays EXACTLY where it is today, even without adjusting anything, I will make $131k over the next 2 years, or 13% per year. I will obviously adjust my not “on track” positions to improve my probability of success, and roll my other positions as the time premium decays to boost my yield, enabling me to hopefully make more than 13%, even if the market stays where it is today. History says that its unlikely that the market will be exactly where it is today in another 2 years, and despite all the doom and gloom in every economic forum today, in all likelyhood, in another 2 years, the market will be 5-20% higher than it is today, meaning that my un-adjusted portfolio would make somewhere between the 13-20% numbers calculated above.

And honestly thats all I’m trying to do.. make 10-20% returns, every year, over the next 20 years, turning my current 500k$ into between $3.3M (in the case of 10% compounded anually) and a cool $19M!!!! (in the case of 20% compounded anually), even without any additional deposits.

So this year is buried at `4%, which is definitely a setback to the above mentioned plan, but considering thats a 24% outperformance of the nasdaq, isn’t too bad.. And hopefully the nasdaq won’t go down another >20% in each of the coming 2 years, but we’ll see how it plays out.

For now, have a great year! And I would love to get some feedback in the comments.

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