Serving Conservative Investors Too
In the Portfolio Armor trading Substack, we lean toward aggressive trades, like buying shares of Super Micro Computer, Inc. (NASDAQ:SMCI) at $21.86 after its auditor quit.
But the Portfolio Armor website offers something else for risk-averse investors. They can enter a dollar amount and their risk tolerance, and the site constructs a concentrated, hedged portfolio for them. That portfolio is designed to maximize the investor’s returns, while strictly limiting their risk to the maximum drawdown the investor indicated.
Here’s an example that surprisingly included a leveraged, single-stock ETF.
Hedged Portfolio For A Risk-Averse Small Investor
This was the hedged portfolio our site created 6 months ago for an investor with $30,000 who was unwilling to risk a decline of more than 13% over the next 6 months.
The investor just entered that he had $30,000 and his maximum tolerable drawdown was 13%, and the site did the rest. It started by allocating equal dollar amounts into hedged positions in The Cooper Companies (NASDAQ:COO) and Robinhood Markets Inc. (NASDAQ:HOOD), which were top names of ours at the time. Then it rounded those dollar amounts down to round lots of each name. Afterwards, it allocated most of the cash left over from that rounding process to the Granite Shares 2x Long COIN Daily ETF (NASDAQ:CONL). That ETF is a 2x leveraged play on Coinbase Global, Inc. (NASDAQ:COIN).
How That Hedged Portfolio Performed
Over the next six months, that portfolio finished up 23.18%, versus up 13.94% for the SPDR S&P 500 Trust (SPY).
You can find an interactive version of that chart here. If you click there and move your mouse pointer to the beginning of the period, May 23rd, you’ll see the net position value for CONL (underlying + the long put leg – the short call leg) was $3,806.85. When the portfolio ended, that net position value was $4,286.70, as you can see in the image above, representing a gain of 11%. The point of that tightly-collared CONL position was to get a better-than-cash return while not increasing the portfolio’s risk, and it did just that.
If You’d Rather Hedge What You Already Have
As a reminder, you can download our iPhone hedging app by clicking on the QR code below. You can also aim your iPhone camera at it.
Want a heads up next time we place an aggressive trade? You can subscribe to our trading Substack/occasional email list below.
If you’d like to stay in touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we’re using that for our occasional emails now).
