Trading Stocks using Bonds

  • SumoMe

IMPORTANT NOTE: PLEASE READ THIS FIRST!  

I was alerted (by alert reader Satish) that the data that I have for ticker ULPIX is incorrect!

There is Bad News and Good News

The Bad News is that – and yes, this is embarrassing but – an alert reader noticed that the data that I have for ticker ULPIX is incorrect on several dates and as a result the performance numbers in the article below are incorrect.

The Good News is that there is still “a Happy Ending” in Part 3 which appears here.  So while you can read the article below for the calculations that will ultimately be used in Part 3, remember that the performance numbers are incorrect.

For the record, here is what happened: Under the category of “from sources believed to be reliable” I have not reviewed the data that I have for ticker ULPIX in some time.  Which is a shame because as it turns out the data that I have for ticker ULPIX and appears to contain random dates with incorrect prices.  This ended up having the effect of mathematically improving performance, but did not reflect reality.  Instead of using SPY data in my initial test, I went straight to the ULPIX data.  Had I tested the results initially using SPY data instead of ULPIX data I would have noticed the discrepancy when I then went to use ULPIX data.

So two takeaways:

1) Yes, this is embarrassing and I should have verified that the data I was using was accurate before “going to press”.  So I apologize for that.

2) Don’t give up on this whole “Trading Stocks using Bonds” thing until you read Part 3.

 

Jay Kaeppel

3 thoughts on “Trading Stocks using Bonds

  1. Hi Jay. Would it make more sense to compare this to buy-and-hold ULPIX rather than SPY? What you’re testing is the timing mechanism of getting in and out of that fund. Comparing it to unleveraged SPY is going to look good no matter what system you propose!

  2. The outperformance results from a strongly positive and continuous trend upward since the 2008 bottom. The 2X leverage compounds very well when there is no continuous downtrend to interrupt it.

    As far as a second filter, look at VQT / SPY for the choice when the system is supposed to be long equities using first filter.

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