• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Investing Steady PutWrite 2022 Year In Review
Investing

Steady PutWrite 2022 Year In Review

by January 16, 2023
by January 16, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

ETF BuyWrite invests in a global equity ETF portfolio built around peer reviewed academic research and then sells monthly out of the money calls on the S&P 500 index covering 70% of the portfolio value.

 

In 2022 the strategies were down -20.9% and -9.5%, respectively. Steady PutWrite underperformed its Wisdom Tree CBOE S&P 500 PutWrite ETF benchmark (ticker: PUTW), while Steady BuyWrite outperformed its Vanguard Total World Stock ETF benchmark (ticker: VT). Both strategies performed within the range of expected outcomes considering the losses experienced by popular stock and bond indices. For example, the Vanguard S&P 500 ETF was down -18.17%, and the Vanguard Total Bond Market ETF was down -13.11%. This was the worst year for the S&P 500 since 2008, and the worst year ever for the total bond market ETF and underlying benchmark index dating back to 1973. It was a rough year in the markets for long term investors.

 

Steady PutWrite

Leveraged notional exposure to put writing in a year where put writing lost money.
 

Collateral invested in intermediate term bonds instead of short term T-bills in the worst ever year for the total bond market.

 

When reflecting on a losing year, the best thing to do is to break down a strategy into its component parts and ask if our beliefs that went into the original creation of the strategy have changed. Questions:

 

Do we still believe that selling monthly at the money puts on equity indices will have positive returns going forward?
 

Do we still believe that intermediate term bonds will outperform T-bills going forward?
 

Is the chosen level of risk exposure in the strategy still appropriate?

 

We believe the answer to all 3 questions is still a resounding yes.

 

Writing puts on the stock market has positive expected returns because insurance comes at a cost to buyers over the long term. Writing puts is the equivalent of selling stock market insurance, and occasionally we must pay out claims. If writing puts didn’t have positive long term expected returns, hedging a stock portfolio would be free. This simply cannot be the case in an efficient market.

 

Intermediate term investment grade bonds include interest rate and credit risks that are not present with short term T-bills. Investors demand long-term compensation to bear these risks, knowing at times duration risk shows up and causes losses like happened in 2022. Since bond markets quickly price in all known information, trying to actively time interest rates is difficult if not impossible as evidenced by the consistent long term failure of actively managed bond funds.

 

The strategy losses in 2022 were large but still within the range of historical and expected outcomes. For example, our backtesting shows that the strategy would have lost more money in 2008 than it did in 2022, which can be seen on the strategy overview page. Followers can easily reduce the risk if desired by trading fewer contracts and by swapping out bond ETF’s for cash. For our published performance where we want to compound returns over the long term at a double digit rate, we’ll stick to our discipline and keep our risk level Steady in 2023 to make sure we can fully participate in the eventual recovery.

 

ETF BuyWrite

ETF BuyWrite outperformed it’s benchmark primarily due to being overweight value stocks, which outperformed growth stocks, and due to profits from selling S&P 500 calls every month. The strategy is designed to compound capital at a similar expected rate of return as Steady PutWrite over the long term, but is more suitable for investors who are more passive or who are using an IRA. Value stocks continue to look historically attractive relative to growth stocks going into 2023, as do Foreign stocks relative to US stocks, and we have confidence that our chosen portfolio of ETF’s will continue to outperform its benchmark. The out of the money short call methodology within the strategy acts like a covered call providing us a downside cushion while retaining the vast majority of the upside exposure.

 

Conclusion

2022 was challenging but provides us with an optimistic outlook for the new year. Bond yields have more than doubled from last year, boosting the Steady PutWrite portfolio yield and softening the duration risk. Option premiums are attractive, and our value tilted global equity ETF BuyWrite portfolio appears reasonably to attractively valued. If you have stuck around for the risk, you might as well stick around for the rewards too. Good luck and best wishes in 2023!

 

Jesse Blom is a licensed investment advisor and Vice President of Lorintine Capital, LP. He provides financial planning and investment advice to clients all over the United States. Jesse has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™ professional. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University. Jesse manages the Steady PutWrite service, and regularly incorporates options into client portfolios.

 

 

You Might Also Like
  • Options Gamma Explained: Delta Sensitivity To Price
  • Tesco share price stuck at 200MA ahead of trading statement
  • What to expect from homebuilder stocks in 2023?
  • Grayscale CEO confirms tender offer if Bitcoin ETF path fails
Share
0
FacebookTwitterPinterestWhatsapp

previous post
At the Edge of Chaos: Has the Game Changed? Possible Buy Signal for Stocks Emerges
next post
Rep. Sheila Jackson Lee introduces bill criminalizing some forms of ‘hate speech’

You may also like

Cramer reveals three industrial stocks worth owning for 2023

December 17, 2022

Shell share price analysis amid oil market woes

November 28, 2022

S&P 500 will keep within this range in 2023: David...

December 6, 2022

Coinbase halts NFT transfers for iOS users after Apple blocks...

December 2, 2022

Options Delta Explained: Sensitivity To Price

April 22, 2023

This analyst sees another 16% downside in S&P 500

January 5, 2023

Market Chameleon Trial Offer

May 11, 2023

Apple stock price forecast: Morgan Stanley sees a whopping 75%...

December 16, 2022

U.S. army picks Textron over Lockheed Martin for a big...

December 6, 2022

Analyst reveals a ‘rare retailer with momentum’ to own in...

January 6, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,633 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,303 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    This analyst sees another 16% downside...

    January 5, 2023

    Peloton stock price is surging: is...

    December 2, 2022

    Rent the Runway stock surged: What...

    December 9, 2022
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here