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This Strategy Profile page provides you with an information-rich introduction to our S&P 500 Bull/Bear (1 ETF) Strategy (or "SP500-BB" for short) and a profile of its many features and benefits.
Below you'll find data and charts of the strategy's historical and recent performance, its robust performance during the Financial Crisis and Coronavirus Crash, info showing its Risk-Adjusted Return, the makeup of the universe of ETFs from which it chooses, a description of the many significant benefits that accrue to an investor using this strategy's guidance.
Paid subscribers receive details on all current positions held, transaction documentation, comprehensive news and statistics for each holding, Closed Position performance documentation, and a more comprehensive set of the strategy's performance data and charts, all updated each weekend. If you would like to see the complete Premium Strategy details that are not provided by this page, you may subscribe with the confidence of knowing you have a 60-day, 100% money-back guarantee if you choose to discontinue the subscription.
If you have any questions about this – or any of our other strategies, please contact us for prompt assistance.
You can gain instant access to the S&P 500 Bull/Bear Premium Strategy page by clicking this link or any of the blue links throughout the page below for instant access to the current ETFs being held by the strategy, all historical trades, related news, and a multitude of actionable details. Why not put this strategy's consistently climbing performance – providing positive returns in any type of economic or market environment – to work for you today?
*For all descriptions and statistics on this page, remember that past performance is not necessarily indicative of future returns.
Please consult a professional investment advisor or financial counselor if you need personalized assistance.
The most recent update of the information on this page was:
Sunday, May 16th, 2021
Strategies are updated each week at midday on Sunday. We will announce any delays.
Trades should be filled at midday on Monday (or Tuesday if Monday is a market holiday).
Copyright © 2021 Optimized Investments, Inc., all rights reserved.
A smooth, steadily climbing performance chart: As you can see from this chart that runs from the strategy's inception on July 1, 2006-to-Present, the S&P Dynamic 500 Bull/Bear Strategy provides a steady and consistent upward assent in its equity curve. The S&P 500 Dynamic Bull/Bear Strategy carefully and consistently identifies the market's regime – whether expansionary or contractionary – or something in between, and selects the optimum S&P 500-based ETF for conditions.
The choices are bullish conditions (using SPY), extremely bullish conditions (using SSO), sideways and volitile (using a short-term Treasury ETF, SHY), bearish (using the inverse ETF, SH), or extremely bearish (using the -2x leveraged ETF, SDS). The S&P 500 Bull/Bear Strategy's performance is shown by the red line while its benchmark, the S&P 500 index, is displayed by the blue line.
KEY: The blue line shown as the benchmark is a buy-and-hold of the SPDR S&P 500 ETF (SPY).
The red line shows the "S&P 500 Bull/Bear Strategy's" performance since inception.
KEY:The blue line shown is the buy-and-hold benchmark: the SPDR S&P 500 ETF (SPY).
The red line shows the "S&P 500 Bull/Bear Strategy's" performance for the last two years.
The advantage of combining two uncorrelated asset classes is that you benefit from a significant drop in volatility with only a minor loss of performance, and a dramatically improved risk-adjusted return. This strategy provides the best Sharpe Ratio (a measure of
risk-adjusted return) of all our strategies, at 1.69. Its Sortino Ratio (another measure of risk-adjusted return that compares the return to the investment's downside volatility only) is an exceptionally high 2.34 - the second-highest of our strategies (just behind our conservative Adaptive Fixed Income Rotation Strategy).
You Can Get This Performance Today
The S&P 500 Bull/Bear Strategy continuously selects the optimum S&P 500-based ETF (of a universe of 5 ETFs) for conditions, with trades taking place about every 2.01 months, on average. The S&P 500 Bull/Bear Strategy strategy is equipped with an effective defense against severe downturns (using cash and/or inverse S&P 500 ETFs when appropriate), and dramatically enhanced performance during market rallies from the 2x-leveraged S&P 500 component. These decisions are determined using a 24-data-set quantitative decision matrix that produces sophisticated analysis and highly robust signals. As a result, the S&P 500 Bull/Bear strategy generates a very steady return of about 30% per year.
In fact, during the Financial Crisis that began in 2008 and saw US stocks plummet -56% in 18 months – a loss which then required another 3-1/2 years to recover – this strategy lost nothing and instead, generated an annualized return of 33.69% throughout (learn more). As a result of producing profits when the market declines, this model also has an exceptionally high Risk-Adjusted Return, with a Sortino Ratio of 2.13 (compare to the S&P 500 Sortino ratio at 0.76).
Data sources: Performance Statistics; Portfolio123, Standard & Poors Global Market Intelligence,
Compustat, S&P Capital IQ, St. Louis Federal Reserve.
Inception: July 1, 2007
Rebalance Frequency: Weekly
Average Position Hold Time: 41.21 market sessions (about 2.06 months)
Nearest Benchmark: S&P 500 Index ($SPX)
Annualized Return (since inception): 25.42%
Total Return since Inception: 2,292.36%
Benchmark Return since Inception: 146.42%
Financial Crisis & Recovery Return: 403.93% (see "Financial Crisis Performance' below)
Percentage of Winning Trades: 63%
Biggest Winner / Biggest Loser: 63.37% / -11.03%
Winning Trades Held for: 2.55 months
Losing Trades Held for: 1.18 months
*Past performance is not necessarily indicative of future returns.
Number of Profitable Years: 13 of 14
Number of Years Outperforming the S&P 500: 13 of 14
Strategy's Average Annual Max Drawdown (AAMDD): -13.26%**
Benchmark (S&P 500) Max Drawdown (since inception): -56.78% (in 2008-2009)
Strategy's Average Annual Max Drawdown (AAMDD)**: -10.14%
Benchmark's (SPY) Average Annual Max Drawdown (AAMDD)**: -13.9%
Strategy's Absolute Max Drawdown (MDD): -25.55% (one week in Aug. 2011)
Benchmark's (SPY) Absolute Max Drawdown (MDD): -56.78% (Oct. 2007-March 2009)
Standard Deviation: 19.45%
Annualized Alpha: 21.89%
RISK-ADJUSTED RETURN (Higher is better)
Sharpe Ratio - Since Inception: 1.29 (Compare to Benchmark at 0.45)
Sharpe Ratio - Last 3 Yrs: 0.77 (Compare to Benchmark at 0.84)
Sortino Ratio - Since Inception: 1.77 (Compare to Benchmark at 0.58)
Sortino Ratio - Last 3 Yrs: 0.96 (Compare to Benchmark at 1.04)
abbreviated name for this strategy is "SP500-BB")
Make This Performance Yours!
*Past performance is not necessarily indicative of future returns. **Average Annual Max Drawdown (AAMDD) is the average of the deepest drawdown each year since inception,
which we believe is the best representation of the peak-to-trough declines you might experience as a subscriber.
Outperformance is nothing if it isn't accompanied by downside protection when the market begins to slide. After all, who wants an aggressive investment approach that produces an excellent performance when stocks are rising – but loses it all (and perhaps more) when conditions turn negative? (There are already far too many investment approaches that match that noxious description.)
However, your S&P 500-based quantitative investment strategy will provide you with protection from loss whenever the risk of a significant market decline occurs. The S&P 500-BB Strategy has never lost money during any year since inception, and has consistently produced a substantial return, year after year.
DURING RECESSIONS AND OTHER DOWNTURNS
Because the strategy is programmed to automatically switch to the optimum S&P 500-based ETF for all possible conditions, it consistently analyzes well-established drivers of investment performance and rotates its S&P 500-based holding to the optimum position. When conditions turn significantly negative, as occurs during economic recessions, this strategy is programmed to rotate first to a cash-proxy, the iShares 1-3 year Treasury Bond ETF (SHY), thereby eliminating any risk there might be of incurring a substantial loss. If conditions continue to deteriorate and turn moderately negative, the strategy will switch to the ProShares Short S&P 500 ETF (SH), and if extremely negative, to the ProShares UltraShort (-2x-leveraged) S&P 500 ETF. This approach has provided exceptionally high profits during significant market declines, such during as the Financial Crisis in 2008-2009. (Please see the next section showing the Financial Crisis for details.)
Then, when economic and market conditions begin to recover coming out of a recession, the S&P 500-BB strategy rotates first to the S&P 500 SPDR (SPY) ETF, and then, if conditions are robust and continue to accelerate, to the ProShares 2x-leveraged S&P 500 ETF (SSO). Always selecting the optimal S&P 500-based ETF selection at any given time produces a phenomenal overall performance with infinitesimally small risk of losing money in any given year (as long as you stick with the staratgy and don't sell on a temporary downturn).* However, that risk does not go away entirely, and no matter how small, you should be aware that you can always lose money when investing in equities.
In the next section, you'll see how this strategy switched to cash just before the Financial Crisis downturn – losing no principal at all – while many investors lost more than half of their life's savings. When the recovery got underway, the S&P 500-BB Strategy entered an incredibly profitable stretch in which it appreciated 280% while investors in other investments were struggling to reach breakeven for full years, gaining 0% in all that time – virtually dead money for 55 long months.
Get Protection from Market Losses
To demonstrate how this strategy protects you from severe market losses and achieves strong performance, the best example we can provide is the Financial Crisis, when the S&P 500 benchmark plummeted throughout all of 2008 and into the first quarter of 2009, losing -54% of its value. Meanwhile, the ETFOptimize S&P 500-BB Strategy first switched to a cash proxy ETF during the downturn, then consistently rotated to the optimum inverse ETFs as stocks declined and outperformed the market by a huge margin.
We show the story in two charts:
The Left Chart below presents the 2007 High to Financial Crisis Bottom. These developments began at the early-December 2007 high just before the downturn, until the lowest point at the Financial Crisis trough on March 9, 2009. You can see that the S&P 500-BB Strategy was climbing the entire time the market was declining – not dipping more than -6% at any time during the crisis – and providing an outperformance of 145% (90% + the 55% downturn of the benchmark).
The Right Chart below shows the entirety of the wild tale – from the Beginning of the Financial Crisis through the Recovery – progressing until some 63 months – 5 long years and 3 months later – when the benchmark finally recovered the -55% loss it suffered at the depths of the Crisis. By the time investors in the S&P 500 benchmark got back to breakeven (0%) after more than five seemingly endless years, our S&P 500-BB Strategy had produced a phenomenal return of 403.93% for subscribers – never losing a dime throughout the entire Financial Crisis and instead, making money every single year of those 5.25 years and turning every $1 invested into $5!
2007 High to Financial Crisis Bottom – From the December 2007 high just before the Financial Crisis began to its low on March 9, 2009, this strategy's benchmark, the S&P 500 Index lost -55%. During the same period, our S&P 500 Bull/Bear (1 ETF) Strategy had already switched to cash from its long position – before the start of the downturn. Then it correctly anticipated the worst market selloff since the Great Depression, and strategy subscribers sat worrying-free in cash, watching the crisis unfold without a concern in the world about their financial security. That's one of the primary benefits of a quantitative ETF strategy; minimal stress.
Financial Crisis & Recovery – This strategy's benchmark, the S&P 500 index, descended from its December 2007 high (just before the Financial Crisis) through its low on March 9, 2009 – losing -55%. Then, as shown in the chart above, stocks began to gain ground in fits and starts for four years, requiring a total of 5.25 years (until March 1, 2013) to return to where they started - to the breakeven level. During all that time, buy-and-hold investors in the S&P 500 had 'dead money,' and struggled just to recover all they had lost. Meanwhile, our S&P 500 Bull/Bear Strategy was producing an amazing return of 404% – 36% Annualized!
Eliminating significant market declines – and the recovery time required – is one of several ways this ETFOptimize strategy produces considerable outperformance. However, it is also generating substantially greater-than-market performance when conditions are bullish. During long bull rallies, when conditions are safe, this strategy will hold the 2x-leveraged S&P 500-based ETF (SSO).
Our sophisticated ETF strategies produce highly accurate timing signals that rotate to the appropriate ETF for conditions, resulting in a very steady equity curve, consistent gains regardless of what the market is doing, and elimination of undue drama – providing you with an investment service that not only has generated a return that is more than 13 times the S&P 500 return over the same time period, but substantially reduces the stress that can haunt an investor's night whenever market conditions get volatile.
Make Money During Crashes
The table below shows this strategy's performance using different start and ending dates each year than is typical. Rather than Jan. 1 to Dec. 31, returns are measured from July 1 each year to June 30 the following year. We find that this Fiscal-Year approach is more consistent for comparison purposes than using the calendar year, which includes unnecessary volatility related to tax-related, profit-or-loss-related, and holiday-related short-term motivations. Since 1998, we have been launching new Premium Strategies on July 1 of the year they were first presented (live) to the public.
The Fiscal Year Performance table below shows this model's returns across the top line ('Model'), the Benchmark's (the S&P 500 ETF – i.e., SPY for most models) performance in the middle line, and outperformance—or 'excess' performance of the strategy over its Benchmark on the bottom row. This table shows the model has been profitable every year since its inception and has beat the S&P 500 every full year. This table's last column began on the most recent July 1 (2020) and is updated monthly through the end of the most recent complete month.
Make This Performance Yours
One of the most important criteria for selecting any investment approach is its 'Risk-Adjusted Return,' which is usually assessed by the Sharpe Ratio or the Sortino Ratio measures. These two metrics show the ratio of an investment's performance to its volatility (which is called its 'risk' in the investment world). Notice in the table below the dramatic outperformance of this strategy when
those two ratios are compared to the strategy's benchmark - a buy-and-hold approach with the widely used 70-30 weighted S&P 500 /Total Bond (SPY/BND) ETF combo.
Since the inception of this strategy in 2006, the Sharpe Ratio (or "risk-adjusted return") of the SPY benchmark is 0.60 – compared to a ratio of 1.45 for the S&P 500-BB strategy. For perspective, most “good” investments produce long-term annualized Sharpe ratios that fall between 0.5 and 1.0, and the S&P 500's long-term Sharpe ratio is about 0.40. Even more impressive is the S&P 500-BB Strategy's Sortino ratio (which measures the return against downside volatility only), which is 2.18 since inception, compared to the SPY benchmark's Sortino ratio of just 0.77. In the last 3 years, the S&P 500-BB strategy's risk-adjusted return ratios are even higher at 2.00 and 2.77, respectively.
You can also see from the last entry at the bottom of the table showing Alpha % that this strategy outperforms its market benchmark by an average of about 20% per year. Compare this to Warren Buffett (with a net worth of more than $80 billion and one of the wealthiest men on the planet, is considered to be the world's most successful investor of all time), who has attained a long-term Alpha of 9.86%. So you'll legitimately be able to say you are outperforming Warren Buffett for as long as you stick with this strategy!
*Note: All figures quoted above are based on their status at the time this section was written. While the numbers will change slightly week to week, the overall thrust of the text remains accurate – this strategy has a very high absolute performance very high risk-adjusted-return.
Get These Exceptional Risk-Adjusted Returns
The S&P 500-based Bull/Bear Strategy selects from a 5-ETF S&P 500-based Universe that consists of the following ETFs (displayed from most bullish to most bearish):
• ProShares Ultra (2x) S&P 500 ETF (SSO) - provides leveraged (2x) tracking of the S&P 500 for robustly bullish conditions
• SPDR S&P 500 ETF (SPY) - the first ETF ever created (1993), it tracks the S&P 500 index during bullish conditions (no leverage)
• iShares 1-3 Year Treasury Bond ETF (SHY) - this ETF is used as a proxy for cash during sideways or unpredictable conditions
• ProShares Short (-1x) S&P 500 ETF (SH) - tracks the inverse of the S&P 500 index for use during lengthy bearish conditions
• ProShares UltraShort (-2x) S&P 500 ETF (SDS) - tracks the -2x leveraged inverse of the S&P 500 during extensive, extremely bearish conditions
Some investors who are fairly new to ETF investing wonder if the ETFs in these universes have enough trading volume to accommodate their investment dollars. When they see low daily average volume figures for some ETFs, they become greatly concerned that it will mean they cannot sell the position when it comes time (as can occur with low-volume stocks). However, you cannot compare the daily avg. volume of an ETF to the daily avg. volume of individual stocks. They are entirely different animals. Please read this
resource article for information on ETF trading volume and liquidity considerations.
For investment (not trading) purposes, investors should have no problem entering and exiting the ETFs in this strategy. While you may not be able to get an instantaneous fill on each trade, ETFs used for investment purposes (as opposed to more rapid-fire trading purposes) can accommodate individual investors with a relatively large personal portfolio of up to $20-$30 million. If you are investing more than $5-$10 million in any one ETF transaction, please contact us for suggestions on how to optimize your fill prices.
STEADY, EXCEPTIONALLY STRONG PROFITS: Selecting a single ETF (from a Universe of five S&P 500-based ETFs) based on the largest, most popular and most prolific market index (the S&P 500), this quantitative strategy always rotates to the optimum position, providing you with consistently exceptional performance regardless of market conditions. With an annual return of about 30% and an excellent risk-adjusted return, the S&P 500 Bull/Bear Strategy rewards users with an investment approach that never significantly dips and never incurs a money-losing year.
The S&P 500 Bull/Bear Strategy's 3-year Sharpe Ratio is at 1.85 (S&P 500's Sharpe is 0.60), one of the highest of all our strategies, indicating that this approach produces outstanding returns with relatively low volatility. The S&P 500-BB strategy also has a Sortino Ratio (performance relative to downside volatility-only) of 2.13 since inception and an amazing 2.77 in the last three years, which is truly exceptional (considering that the S&P 500 ETF (SPY) has a Sortino Ratio of just 0.77).
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PROTECTION DURING DOWNTURNS: When significant market declines begin to take place, this strategy offers a very effective defense: it switches to cash. That is, when the strategy's quantitative algorithms determine that a significant economic contraction is beginning – before stocks start to slide with alacrity – this strategy will have already rotated to the iShares 1-3 Year Treasury Bond ETF (an ETF proxy for cash). If conditions continue to worsen, it switches to the ProShares Short (-1x) S&P 500 ETF (SH), which tracks the inverse of the S&P 500 index. If conditions become extremely abysmal, the strategy will rotate to the ProShares UltraShort (-2x S&P 500 ETF (SDS), which tracks the -2x leveraged inverse of the S&P 500 during extensive, extremely bearish conditions.
Then, when underlying fundamentals and technical measures signal that conditions have turned favorable, the S&P 500-BB Strategy will automatically switch to the long S&P 500-based ETF (SPY) – and if the upturn in conditions is exceptionally robust, the 2x-leverage version (SSO) will be used, which provides performance that is double the return of the S&P 500 index. Since the S&P 500 is an index of America's largest, most well-established corporations, this 2x-leveraged ETF based upon that index is very stable and consistent. The excellent, steady performance of this S&P 500-based strategy provides you with a sample of we can expect going forward, regardless of what the future may may throw at the markets.
UNEMOTIONAL, EFFICIENT INVESTMENT DECISIONS: Having a proven, mathematically driven investment system working for you allows you to ignore the financial media, with its click-bait pessimistic market outlooks, coffee-fueled TV shysters, and hype-reliant internet hooligans that attempt to lure you into their own capricious agendas that surreptitiously hijack your wallet. Instead, your weekly ETFOptimize Strategy Update will provide you with the accurate intelligence you need about your strategy's performance for the last week, month, and year, detailed documentation of trades when they occur, and a comprehensive set of statistics so you can quickly check your progress toward achieving your financial goals.
You also get a weekly review of market conditions, based on our proprietary indicators, that will prepare you for what's coming in the next five sessions and more. Subscribers can sleep soundly knowing that their strategy is always selecting the optimum positions for conditions and perhaps most advantageous of all – knowing that by design, there is virtually no risk of losing money in any given year.*
EASY TO USE: With the ETFOptimize strategies, activity is infrequent, with 3.83 months between trades. For this strategy (S&P 500 Bull/Bear), the average hold time is 40.27 business days or about 2.01 months. When a transaction occurs, you get clear recommendations that you can quickly execute with the click of a button at your broker's website. For investors who want to become familiar with each position, we provide a link to complete background data and relevant news for each ETF selected for use by the strategy.
The ETFOptimize strategies are unquestionably a breakthrough in the investment world – providing what legitimately may be the easiest way to attain substantial wealth through consistent compounding – with minimal risk. For investors, they can be the "Holy Grail" – a simple, proven investment approach that significantly gains ground through both bull markets and bear markets alike.
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