Trend Following for the Long-Term

Discussion in 'Stock picks and trading strategies' started by Gilbert J. Arevalo, Jan 23, 2013.

  1. Hello. My name is Gilbert. I'd like to share with you my 15 years of trading results.


    First off, I determined in the summer of 1998 that trading will involve compounding a market-beating return. Yes, I was aware that a single-digit percent of all fund managers actually DO this.


    I began trading covered calls only during market uptrends. After all, compounding good monthly returns mathematically stack up to an excellent annual return.


    Compounding these annual returns would be an awesome dream come true!

    - more to come...

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  2. ShermanTanker

    ShermanTanker Member won weekly contest 3x

    Compounding is great.

    Isn't writing calls far better than buying them as far as time decay is concerned?

    Doesn't time work directly against the buyer of calls?

    Thanks for the info...compounding returns is the key to wealth.
     
  3. With covered calls, time decay works to the call option writer's benefit. Selling call option contracts against stock already owned generates a premium that seller keeps no matter what the stock price does. As time erodes toward expiration, more and more of the premium is realized creating wealth for the call writer.

    On the other hand, the option buyer needs the stock to move in a certain direction within a certain amount of time. Time works against this and you are correct, the majority of option contracts expire worthless!

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  4. If you like covered calls, in 2013 I started a Covered Call Fund that strictly trades ETF's. ETF's have more diversification than individual stocks. So far we've had some success in putting money to work.

    With this high-growth CC strategy, strict stop-loss rules MUST be in place. Our position cost basis (stock purchase price minus option sell price) is our stop-loss target.

    Capture15.jpg

    You can find more at my Yahoo! Group.

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
    Last edited by a moderator: Mar 22, 2014
    pennystockwhizzkid likes this.
  5. If you haven't gone to the Y! Group (see above), please join...we need you to PARTICIPATE in the discussions :rolleyes2:!

    So for those interested, here is the 2013 ETF CC Fund Trading History.

    Note that even within this uptrend, we got stopped out of (2) covered call writes. As I've said, this "high-growth" strategy has to keep a tight rein on losses.

    As you can see, we're holding onto a small but decent monthly gain despite taking some losses.

    kcth01262013.jpg

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
    Last edited by a moderator: Mar 22, 2014
  6. If you have interest in covered calls, please ask any questions you may have. My main focus these days, however, are my trend following systems (See My Profile or http://www.collective2.com/c2-profile-26437948#jumpManaging). These capitalize on uptrends, like my covered call system, as well as downtrends - which has increased my annual percent returns.

    So, both of these trading strategies capitalize for the long-term and allow the power of compounding to take full effect.

    - more to come...

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  7. These days, managing my 2013 ETF Covered Call Fund is pretty much a side-note. I have proven this strategy with excellent returns for well over a decade. Annual returns exceed the S&P 500 by about 20 percentage points. Drawdown (max) is contained to less than 25%. Compounding these annual returns is the key to a truly successful system. At my Yahoo! Group I still let members "watch over my shoulder" as I manage these trades. Please join and let me know what you think!

    Here is an UPDATE of our 2013 ETF Covered Call Portfolio (as of Friday, January 25, 2013). Please note that after 3 weeks of management, most positions have moved ITM (in-the-money). That will enable me to open more positions - perhaps on margin - that enhance our returns. The goal here is to manage good monthly returns as the market trends upwards, all the while containing losses during market corrections. Again...stacking these annual returns compound powerfully.

    Capture18.jpg

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"

    PS speaking of more, I'll also share my new trading programs with http://www.onlinetradersforum.com.
     
    Last edited by a moderator: Mar 22, 2014
  8. Still here...had a move this past weekend. Interesting to see the market break out of it's recent range (in lighter trade) on Friday. Then to see the market pullback significantly - again in light trade...only to rebound in strong trade today.

    You can follow me on twitter (@hedgefundsguru) to find - "Tuesday’s strong start follows this year’s worst single-day downdraft, and its rapid reversal is consistent with a healthy uptrend."MW
    &


    IBD's focus is on top-rated stocks for growth-minded investors,not just big old companies with poor returns. My systems: long-term & growth!

    Meanwhile the trend continues to be a friend with my trend following index futures and ETF trading programs.

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  9. Well another trading week has closed. The Dow snapped its weekly win streak, while the S&P 500 and Nasdaq extend...for a sixth straight weekly gain! My funds have been with the latest profitable trend, since 26-Nov-2012.

    Meanwhile, since our last 2013 ETF CC Fund report,we've entered (2) more covered call positions that continue to move ITM.

    2013MP0208.jpg

    FEB options expiration is just one week away.

    Just in case you've been wondering how accurate capturing these market uptrends (& downtrends for my index futures & ETF trading systems) has recently been. Main trend shifts occurred: 7-27 (up),10-11 (down) & 11-26 (up).

    So what you've been seeing here is the compounded effect of managing monthly returns using ETF CC's for as many months possible in each year. Yes, this system works quite well across most all years, containing (max) drawdown to about 20-25%.

    We will now calculate the compounded effect of managing these annual returns over time...

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
    Last edited by a moderator: Mar 22, 2014
  10. Well I got a call from a potential Silicon Valley investor that wondered how accurate my market timing - or IBD's signals - are and I explained that William J. O'Neil's research was conducted for the entire life of the American Stock Market. The key signal indicators are Price AND Volume that have an 80% accuracy in calling each new emerging uptrend.

    Yes, I explained to him that I have tested this since 1998 and find these accuracy measures real and accurate. I also explained that during volatile times such a the tech bubble and the economic/financial blow-out signals are less accurate - but that money is preserved!. I also explained that once government intervention in the form of "stimulus" of economies is lessened, signal accuracy improves...but that NO ONE CAN PREDICT THE MARKET.

    "Follow-through confirmations", I explained, are a very accurate indicator of institutional money flows - just as is tracking market distribution (as seen in the paper's The Big Picture"). There are many indicators, but IBD points out that aside from "Price and Volume", the rest are at best secondary. IMHO, figuring what strategy indicator will work best during what market period is at best a crap shoot. Just as targeting which hedge fund will out-perform and for how long and when to get out. NO ONE KNOWS!

    If they did immense wealth (aside from fees) would surround these gurus. So take what the market gives you for twenty years and achieve your monetary goals. Maybe luck will be on your side and instead of 10% you'll average 11% with the small number of "market beaters" and grow a bit more for retirement. Or just hope to get temporarily lucky and ride the coat-tails of someone "in the know".


    In the end...trading will likely stay just a hobby, with long hours in front of the computer screen. MAKING/KEEPING TRADING GAINS IS NOT EASY! What can you commit of your net wealth toward trading investments if the strategy doesn't hold up for multiple years or decades - managing risk with a large annual return average, while containing drawdowns?

    More on compounding out-sized annual returns...

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  11. Taking a pause from the "LIVE" demonstration of the 2013 ETF Covered Call Fund (which as I've said is secondary to what I'm doing these days) I'd like to give you a glimpse of my new trend following futures and ETF trading programs. These capitalize on uptrends and downtrends (quite accurately "called" by IBD) and are developed to out-perform for the long-term.

    Like stated in my profile more detailed statistical date analysis (independently audited) can be collected at best-tradingsystems.collective2.com. But here is a snapshot of OPEN position and total gains -

    MySystems02122013.PNG

    - G
     
    Last edited by a moderator: Mar 22, 2014
  12. Dialing back to my 2013 ETF Covered Call Fund, with Friday came stock option expiration. With the past month's CC positions, we find (3) that are called away and (1) call option expired leaving us with the shares.

    With the market still in a "confirmed uptrend", we now have cash to invest in more covered calls. Below is the UPDATED portfolio and (corrected) trading history.

    2013MP0215.jpg

    2013TH0215.PNG

    - G
     
    Last edited by a moderator: Mar 22, 2014
  13. UPDATED performance charts:

    2013PC0215.jpg

    2013PCa0215.PNG

    - G
     
    Last edited by a moderator: Mar 22, 2014
  14. Be sure to follow my Yahoo! Group: http://finance.groups.yahoo.com/group/CoveredCallFund-Mentoring/

    It too is a trend following system, but cashes out during downtrends. It has been managed impressively since 1998, and now just uses ETF covered calls.

    Ask anything you'd like. It is a long-term system that is easy to manage and I challenge you to find anything that compounds returns this powerful!

    - G
     
  15. We've seen a nice jump from our last update (ETF & Futures Trend Following Systems)

    MySystems02192013.PNG

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!
     
    Last edited by a moderator: Mar 22, 2014
  16. What we have now, as declared by IBD's Market Pulse (http://www.investors.com/pdf/GMI_022213.pdf), is an "uptrend under pressure".

    Furthermore, it is not only possible - but essential - to Track Distribution Days To Spot A Market Top (http://education.investors.com/inve...racking-distribution-days-a-crucial-habit.htm)

    For my trend following trading systems, interpreting what the market is telling now is significant.

    - gA

    More recommended reading: Investor's Business Daily Guide to the Markets.
     
  17. It has been an interesting time for this ETF covered call strategy. Firstly, the stock market got a jump - right out the gate - to commence 2013. Secondly, most positions got stopped out with the recent market uptrend put under caution. Many have already called the market in correction, while IBD has yet to signal the shift.

    Even still, initiating new positions in this environment is tenuous at best. Here are our updated charts. Keep in mind, this is a truly successful, long-term high-growth system and keeping rein on losses is paramount.

    2013MP0222.jpg
    2013PC0222.PNG
    2013PCa0222.PNG

    - G
     
    Last edited by a moderator: Mar 22, 2014
  18. Today's action - closing out our last OPEN covered call position with our automatic stop method - is quite indicative that the trend shift will be announced tonight by Investors.com to a "market in correction".

    That patently puts our 2013 ETF CC Fund fully into cash, while we await the confirmation of the next market uptrend. No one knows how long a correction will last - but rest assured, time-and-again the best place to be is fully into cash!

    - Gilbert
     
  19. With the Stock Market is in a correction, while our 2013 ETF Covered Call Fund is fully into cash, I'll redirect your attention to my Index Futures & ETF Trading Programs.

    There are a lot of very strong bounces along the way as a correction unfolds. The price & volume action from the indexes is what I focus on most. For instance, today's (short-covering?) bounce is quite strong, but lacks any conviction as indicated by total trading volume.

    Investors.com reiterates these time-proven facts over-and-over to their readership, because by far this is what moves markets the most. "Price rarely goes far without volume" holds true and for this investor, where continued annual tracked gains takes precedence, has been proven time-and-again.

    My long/short systems may not make as much in a downtrend as in an uptrend, but large losses are averted and some gains may unfold. For now, we look to see how much this market will correct and how soon off the bottom we can re-enter long.

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
  20. Some recent tweets @hedgefundsguru...

    Friday test of Nasdaq’s 50 dma, the S&P 500’s 1500 level and the NYSE’s 5-day line - found support after falling close to respective areas.

    You can see the sloppy the action the past eight sessions - compared to the tight action earlier in the year. See Kingdom Capital Trading Systems

    Can bulls grab control of the market? A follow-through day is needed. It involves a big gain & up vol on Day 4 or later of attempted rally.

    Such action would confirm the market is in a new uptrend. Then http://kingdomcapitalsystems.collective2.com would profit LONG. Get in now while in a correction!

    Gilbert J. Arevalo
    Kingdom Capital
    "...more than just a covered call company!"
     
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