The year 2020 is finally over and let’s hope that 2021 is a much better year! On the positive, the Pinnacle strategy finished the year with a solid +41.8% realized gain after commissions. The operative word for this non-directional investment strategy in 2020 was “patience”. We had some decent gains by September, but the monthly portfolio gains, losses and drawdowns during the year were very choppy and uneven caused by high market volatility. We finished the year with strong results in the last two months once the November elections were over, and this pushed up the returns to an excellent +41.8% realized gain.
Please read the note for Nov 2020 that describes the price action throughout the year. It was challenging to trade through the high volatility that we endured for most of the year. Once we got through the presidential election on Nov 3rd, volatility finally declined to a manageable level, and the Pinnacle strategy became highly optimum.
When volatility is elevated, but not too high like it was when the market crashed in March from COVID, we’re able to shorten our trade duration to five trading days, instead of ten, and we’re able to bring in higher levels of premium. Most options traders know that when volatility is elevated, it’s best to sell options, not buy. The Pinnacle strategy is an options selling strategy, and it should be able to generate 7% to 10% gains per month through March 2021 as volatility (VIX) most likely remains elevated from the pandemic.
This strategy is managed conservatively where the portfolio exposure level is held below 40% during steady state. Thus, sufficient levels of cash are held in the accounts to manage through unexpected spikes in volatility.
All trades and returns can be verified as we send all trades to 3 separate brokers for autotrading.
The Upside Options team has 18 years of experience in trading and optimizing this strategy.