The Option Strategist Newsletter 2020 Profit/Loss Summary

By Lawrence G. McMillan

We have completed the Profit and Loss and Rate Of Return calculations for 2020. The following table sums up one of the best years in our history – the best since the 1990's in percentage terms (+42.2%), and the best ever in terms of total profits (+$146,830). We will soon be sending out a detailed article discussing the various facets of these rather broad categories.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

Some quick examples of what’s in a category:

Hedged Strategies

• Futures sell – ES put ratio spreads and hedges
• Naked puts – the “old” style; high probability
• Equity Buys – earnings straddle buys, primarily
• Equity calendars – self-explanatory
• Equity sell – aggressive put sales (SPAC put sales – only two in 2020)
• Index buy – solely the W1 SPY calendar spread
• Index sell – SPY put ratio spreads and hedges
• Inter-Market – VIX/SPY hedged strategies, and the HOG/RBG spread.

Speculative Strategies

• Spec Equity – one biotech straddle buy, plus the “arb” stocks bought in March 2020
• Spec Futures – one mBB sell signal in TLT
• Spec Index – the “Big Short” (VXX puts)
• Spec Systems – all of our trading systems (VIX “spike peak,” mBB, Seasonals, etc.)
• Futures P-C, Index P-C, Stock P-C – put call ratio based trades in each of those categories

Many of the large profits came in the Feb-March “crash” and its aftermath. We will have an in-depth article and further breakdown in the coming week, and this will be posted on our website.

For our complete historical track record, click here. 

This article was published in the 6/4/2021 edition of The Option Strategist Newsletter.