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OP SmartWrite is a Covered Calls focused portfolio whose focus is to build wealth. The key objective of this portfolio was to develop an approach that can withstand almost any market moves and still generate a positive alpha vs simply buying-n-holding a basket of stocks. As I mentioned when we opened the portfolio in October that it is probably the worst time to open covered call or Buy Write positions as implied volatility is low and markets are rallying like never before.

Since then, even after including recent pullback, S&P 500 is up +5.95% (since Oct 2nd start of the portfolio) and SmartWrite’s benchmark The BuyWrite Index ($BXM) is up +5.19% !!!

So how did OP’s SmartWrite Portfolio perform, here is the snapshot:

1. SmartWrite is up +7.3% vs +5.19% (BuyWrite) and vs +5.95% (S&P500).

2. We started with 10 underlying, choosing highly liquid stocks in such a way that it can be scaled to hundreds of millions of dollars!!!
3. There was only 1 change in underlying assets during 4 months of holding period!!
4. Trading was limited to just a few times per month (except for rolling weekly hedges).
5. We didn’t place any major hedge for individual stocks. But instead, hedged the whole portfolio (Using VIX and SPYs).
6. No individual hedge was placed before earnings announcement of an individual company.

Bottom-line: With little trading activity, the portfolio has generated almost 200bps alpha over the benchmark BuyWrite index as of  Jan 28th closing. We will continue with the experiments and learn more as markets might be starting to pullback. A severe market pullback or any single company going bust will be key tests of the strength of this portfolio.

Should you have any questions, or if there is any way I could help you in turning around your trading, let me know via writing an e-mail to -> Ask@OptionPundit.com

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