February and March 2023 are in the books and our HFEA strategy is set to improve. It is still mediocre despite our leveraged ETF rallying. But we have covered call options against our positions and now these calls are hurting that position now. But I believe, this is just a temporary setback and we will be able to manage it well.

Initially, I dedicated $15,000 to this strategy. That represented approx 15% of our portfolio. When the SPXL underperforms the market and my position goes down and is below my cost basis (my position is in red), I add new shares to my portfolio. I deposit cash and buy shares. Once this bear market ends, and trust me, it will, as no bear market lasts forever, I will stop buying new shares but trim the position and save cash from selling for the next bear market. This is a standard balancing approach. Keep my position at about 15% of my main portfolio. When it moves to 20% (or more), I sell enough to bring the position back down to 15%. If it moves down to 10%, I will buy enough to bring it back to 15%, and so on.

In today’s bearish market, I am adding new cash and buying even though it hurts my short-term net-liq. However, I expect this to change soon.
 

MONTH	NET-LIQ	PROFIT/ LOSS	PROFIT/ LOSS %%
June 2022	$12,199.81	$5,276.32	76.21%
July 2022	$15,551.55	$3,351.74	27.47%
August 2022	$13,414.80	-$2,136.75	-13.74%
September 2022	$10,454.70	-$2,960.10	-22.07%
October 2022	$16,809.60	$6,354.90	60.79%
November 2022	$18,659.90	$1,850.30	11.01%
December 2022	$16,562.20	-$2,097.70	-11.24%
January 2023	$15,010.60	-$1,551.60	-9.37%
February 2023	$13,990.20	-$1,020.40	-6.80%
March 2023	$13,132.00	-$858.20	-6.13%

 

Our HFEA strategy decreased value in February 2023 by -6.80% and in March 2023 by -6.13% while the entire market lost -2.70% in February and gained 3.71%. Overall, the HFEA portfolio is down -2.31% while the entire market is down -9.71%. I think that is still a good result.
 

We also generated $50.00 income from selling covered calls in February and $340.00 in March. We will reinvest that income according to the account rules (either back into the SPXL or cash reserves SCHD).

HFEA charts

 

Strategy Net liquidation value
 

The chart above illustrates how volatile the account can be during volatile markets. The best approach to this strategy is to buy and forget. Watching the position too often can bring you diarrhea.

Strategy vs SPY Net liquidation value
 

Strategy performance vs. SPY
 

February and March 2023 were not good months for this strategy as the SPXL still lost value (remember, the leveraged ETFs work both ways – they go up 3 times, but they also go down 3 times).