One more for NewAIMer,

Missed this one: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=154092765

-AIMStudent

Hi NewAIMer,

You might have a look at the posts below. You could roughly approximate TQQQ based on these.

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153977582

https://investorshub.advfn.com/boards/replies.aspx?msg=153979905

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=154092315

Best regards,
- AIMStudent

The power of scaling in & out...

Lots of groupings of consecutive buys over four and five days. Do you have any rules around number of back-to-back buys (and sells) or do you just buy until you run out of cash?

-AIMStudent

Thanks Myst. Additional follow-up.

Thanks for clarifying.

An additional follow-up. How does the SW determine the buys and sells? Not the calculations, but how they are entered. For example, does it assume the price of the buy/sell forecast in the SW is the exact tick amount achieved on the day that price is encountered, similar to having a standing limit order? If so, is there any allowance for slippage? Or does it assume closing price on day the price is encountered. Or next session's open?

Thanks,
-AIMStudent

ST & LT on MSTR - B&H P/L?

Hey Myst,

Apparently I'm missing something in my understanding of your calculations for B&H P/L.

MSTR Close
02/02/21: $ 687.92
11/22/21: $ 690.02
B&H P/L: (690.02/687.92)-1 = 0.31%

05/03/21: $ 635.62 # 05/02/21 is a Sunday
B&H P/L: (690.02/635.62)-1 = 8.56%

Even if I convert to shares at the start (and have small cash left over from rounding shares down), use opening price, previous close, etc. the B&H % P/L is nowhere near what you are showing.

What am I missing...?

Thanks,
-AIMStudent

@JDerb re: Civil public discourse.

+1

-AIMStudent

Hi Myst,

A couple of questions for you:

1. The "Initial Buy (%)" at 100. Does that mean when this position was opened the entire allocation would have been to buy shares with no initial allocation to cash?

2. The "Upper Band (%)" and "Lower Band (%)" values. How are these initially determined for a new position? How often are they optimized? How are they optimized? What event(s) cause a re-optimization?

Thanks,
-AIMStudent

Hi AIMAGIC,

Your results are similar to my investigations:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153732779
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153977582
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153997676
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=154092315
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=154092765

Hope it helps,
-AIMStudent

Re: Help with Equation

Hi Vitali,

I'm not certain I entirely understand your ask, but I'll take a shot using your example

Where:
Current Cash Value = $1,179.80
Current Cash Reserve Percent = 59%
Desired Cash Reserve Percent = 43.5%
Current Share Price = $13.08

Step 1: Convert Current Cash Value to 100% Cash Value
100% Cash Value = Current Cash Value / Current Cash Reserve Percent
Ex: $1,999.66 = $1,179.80 / 59%

Step 2: Calculate Cash Reserve Delta Percent
Cash Reserve Delta Percent = Current Cash Reserve Percent - Desired Cash Reserve Percent
Ex: 15.5% = 59% - 43.5%

Step 3: Calculate Dollar Amount to Sell
Dollar Amount to Sell = 100% Cash Value * Cash Reserve Delta Percent
Ex: $309.95 = $1,999.66 * 15.5%

Step 4: Calculate Number of Shares to Sell
Number of Shares to Sell = Dollar Amount to Sell / Current Share Price
Ex: 23.7 = $309.95 / $13.08

Proof:
Desired Cash Reserve Percent = (Current Cash Value - Dollar Amount to Sell) / 100% Cash Value
Ex: 43.5% = ($1,179.80 - $309.95) / $1,999.66

Note: New Cash Value = $869.85 = ($1,179.80 - $309.95)

This example will only work when Desired Cash Reserve Percent < Current Cash Reserve Percent, but can be easily modified.
It will be difficult to achieve this in a single Excel equation without computing one or more of the intermediate values noted above (or without writing a macro.)

Let me know if this is what you're looking for. Otherwise, I'll make another attempt.

-AIMStudent

Hi Vitalli, Excel spreadsheet...

You should be able to take the cell that contains this equation:

= [100% * (LOG(100.00 - LOG(1.00))] + LOG(1.00)

and change it to:

= 10^[100% * (LOG(100.00 - LOG(1.00))] + LOG(1.00), or
= power(10, [100% * (LOG(100.00 - LOG(1.00))] + LOG(1.00))

Hope it helps.

-AIMStudent

Sorry, error in previous example:

[100% * (LOG(100.00) - LOG(0.00))] + LOG(0.00) = 2.0

is incorrect. Should be:

[100% * (LOG(100.00 - LOG(1.00))] + LOG(1.00) = 2.0

-AIMStudent

Hi Vitaali, Excel spreadsheet...

I think you may be confusing dollar amount and Log value.

For the example you provide, the amount returned should be 2.0, not $200.

[100% * (LOG(100.00) - LOG(0.00))] + LOG(0.00) = 2.0.

Hence, in my previous post I referenced it as Dollar Amount as Log value.

To derive the Log value to a "true" dollar amount you will need to convert from the log value using either equation below:

Dollar Amount = 10^Dollar Amount as Log value, or
Dollar Amount = power(10, Dollar Amount as Log value)

Again, using your example:

10^2.0 = $100

Hope that helps.

-AIMStudent

Hi Vitaali, Excel spreadsheet...

The calculation would be:

Dollar Amount = [Desired % * ($ High Price - $ Low Price)] + $ Low Price

To prove using your example:

[ 0% * ($43 - $16)] + $16 = $16
[100% * ($43 - $16)] + $16 = $43

For the Log case (e.g. Dollar Amount returned as LOG):

Dollar Amount as Log = [Desired % * (LOG($ High Price) - LOG($ Low Price))] + LOG($ Low Price)

Hope that helps.

-AIMStudent

Hi Adam,

TooF is correct. 7-day SEC yield is used to make annualized apples-to-apples comparisons, originally for money market funds.

To calculate for SWVXX see fund profile here.

NAV: $1.00
Daily distribution: $0.000000822

($0.000000822 * 365) / $1.00 = 0.03%

-AIMStudent

Re: The story of the Three Bears.

They're dancing out on the balcony. Will it support their weight?

And the band played on...

AIMStudent

Re: IPOs and New Issues..

Hi Tom,

Thanks for posting this.

1. What does the vertical axis represent? For example, indicator is currently just over 4.00. What does 4.00 represent?

2. If I look at the high of just over 2.00 in 2018 (sometime in early Oct?) and calculate percentage returns of the broad market as represented by SPY in this case, I see the following which tends to support your research:

* 9 month return: +1.0%
* 12 month return: -1.6%
* 18 month return: +3.0%

How far back have you tracked this indicator?

Thanks,
AIMStudent

Hi Toofuzzy,

Comparative results using AIM.

None of the following filters were applied:
* 30-Day Buy rule
* Vealie sell rule
* Increment/decrement Buy %
* Increment/decrement Sell %
* Do not allow cash to go negative

-AIMStudent

Hi jdmagaw,

Since I seem to been spending lots of time inside these days, I ran AIM against SPIP back to the date of initial introduction. It has a longer history than TIPX, but both show similar results across AIM settings.

There's not really sufficient price volatility to make either of these worthwhile AIM candidates.

Model Setting:

• Starting Capital: $10,000
  
• Stock-to-cash ratio: 70%
  
• Buy & Sell SAFE %: 10%, 10% for all iterations. Buy SAFE % incremented by 10% on subsequent buys and decremented by 10% on subsequent sells.
  
• Minimum Order as a percent of Stock Value (Buy, Sell): Where 0% is used, a minimum of one share will create a buy or sell event.
  
• Interest Rate: 0.0% for all iterations

• 30-Day Buy Rule: Wait for 30-days between sequential buys.
  
• Inc/Dec Buy SAFE %: Increment Buy SAFE % by 10% on each subsequent buy and decrement Buy SAFE % by 10% on each subsequent sell, down to a Buy SAFE % floor of 10%.
  
• Vealie: Implement a Vealie each time a sell event is encounter when the cash value to portfolio value exceeds 30%. (Note: taking a Vealie does not reduce the Inc/Dec Buy SAFE % value.)
  

Hi Adam,

I'm running two AIM portfolios:

1. One made up of 11 of the 12 Select Sector SPDR funds.
2. One made up 9 individual companies, using LEAPS rather than stocks:

My purchasing department...

...is now officially in quarantine for the next 30 days.

-AIMStudent

Thanks Clive.

It is interesting to note that performing the annual rebalance increases the 50/50 QQQ/VBMFX CAGR from 6.64% to 7.56%.

-AIMStudent

AIM v. B&H - Buying at lows...

I found this to be an interesting exercise...

With all special cases enabled, AIM'ing at the lowest price does not beat B&H starting on same date (over selected datasets.)

Fifth panel is O over 25.2 years, allowing cash to go negative. O was selected as it has the lowest (positive) Beta in the SP500 (0.01).

-AIMStudent

NASDAQ 100 runs continued...

Similar runs as started in post # 44224 , but cash is never allowed to go negative. All buying activity is stopped at point where insufficient cash is available until additional sells take place and cash is raised.

-AIMStudent

NASDAQ 100 runs revisited...

Hi Tom,

For reference, the Inc/Dec Buy SAFE % +/- 10% in the previous post resulted in the following:

Beginning with the first buy on 2000-04-14, Buy SAFE% increased sequentially until it hit 70% on 2002-09-03 and remained in that state until 2005-11-25 at which point sells began to occur.

The second frame below uses the same run as in the previous post by combining all special cases, EXCEPT that Vealies have been modified to apply to decrementing the Inc/Dec Buy SAFE % by 5% until the floor of 10% is reached.

-AIMStudent

Below are various runs of the NASDAQ 100 (ETF: QQQ) over the past 20+ years along with the buy & hold results over that time period.

Below those two frames are various AIM runs over the same dataset with a variety of settings, with run-to-run changes denoted in yellow.
Above each model are seven values that represent the model's setup for each run.

• Starting Capital: $10,000 used across all iterations.
  
• Stock-to-cash ratio: 50%, 70%, 80%, then 70% for all remaining iterations.
  
• Buy & Sell SAFE %: 10%, 10% for all iterations. Buy SAFE % incremented by 10% on subsequent buys and decremented by 10% on subsequent sells.
  
• Minimum Order as a percent of Stock Value (Buy, Sell): Where 0% is used, a minimum of one share will create a buy or sell event.
  
• Interest Rate: 0.0% for all iterations

• 30-Day Buy Rule: Wait for 30-days between sequential buys.
  
• Inc/Dec Buy SAFE %: Increment Buy SAFE % by 10% on each subsequent buy and decrement Buy SAFE % by 10% on each subsequent sell, down to a Buy SAFE % floor of 10%.
  
• Vealie: Implement a Vealie each time a sell event is encounter when the cash value to portfolio value exceeds 30%. (Note: taking a Vealie does not reduce the Inc/Dec Buy SAFE % value.)
  

Re: AIM vs Buy/Hold....................

I checked the Next Buy and Next Sell Price points for the 5 year dataset and they appear to be accurate. The trade events are below.

-AIMStudent


Date source: Yahoo Adjusted Closing prices.

Thanks AIM1979, Appreciate the reply.

My analysis was primarily in response to Vitaali's inquiry regarding AIM v. Buy & Hold on the broad market.

The model uses Next Buy Price and Next Sell Price (as calculated here: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145213521) to execute trades, rather than trading once a month.

I'll go back and investigate the analysis for integrity, especially during the 2018.09.17 to 2018.12.17 interval as you suggest.

-AIMStudent

Re: AIM vs Buy/Hold....................

As a follow up to post# 44113: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153514055

Below are three runs of the broad market (SPY) over the past 5, 10, and ~27 years.

The model represents Lichello's original "vanilla" model (with exceptions noted below):

• Stock-to-cash ratio: 50%
  
• Buy & Sell SAFE %: 10%
  
• Minimum shrs to trade: 1 (Note: In examples in the book, it appears this is 2 minimum)

• Due to the low interest rate environment that we've experienced, I've set return on cash to 0%.
  
• Buys and sells based on Next Buy and Next Sell Price, rather than evaluated at month end.
  

• Higher starting stock-to-cash ratio (Also endorsed by Lichello in subsequent revisions of the book.)
  
• 30-day moratorium between buys
  
• Increase and decrease Buy SAFE % after buys and sells
  
• Minimum buy and sell amounts based on stock value or Portfolio Control
  
• Vealies

• Starting with initial portfolio allocation to stock at 50% of total capital
  
• More sells than buys, resulting in large cash build up and a reduced number of shares held

Hi Vitali,

I believe what you are looking for is:

Percent of range = (Current price - Lowest price) / (Highest price - Lowest price)

So for your example, (7 - 4) / (15 - 4) = 27.3%

AIMStudent

AIM LEAPS portfolio for 2020

Given the relative success I had running the AIM LEAPS portfolio during 2019, I'm modifying my rules/guidelines and will be running it again in 2020.

• Stock universe is large US, high cap companies that have some amount of perceived stabilization (e.g. consistent earnings, consistent and increasing dividend payer, strong dividend coverage ratio, etc.)
  
• All options written on the Jan 15, 2021 expiration.
  
• All options purchased as close to At-The-Money as possible.
  
• Corresponding option price needs to be low enough to purchase at least 15 contracts. (Thus corresponding to lower priced and/or lower volatility stocks.)
  
• Initial LEAPS-to-Cash allocation is 70% / 30%.
  
  • Use entire Cash pool across portfolio to buy as needed.
    
  • % Cash in green represents cash holding above initial allocation of 30%.
    
  • % Cash in red represents a negative cash amount.
• Buy SAFE initiated at 10%. Sell SAFE initiated at 5%.
  
• Target 8 - 10 separate issues.
  
• Diversify across sectors and industries.
  
• Use the 30-day rule between subsequent buys.
  
• No time based rules for subsequent sells. (And currently no other rules, but I'm investigating Tom's cash threshold idea of avoiding a sale by raising the Portfolio Control by half the Sell Market Order value.)
  
• Trade order targets ~5% - 6% of value of total contracts held for each issue. (15 initial contracts will only allow for 6.7% minimum.)
  
• Roll to next expiration series in April.
  
  • Nine months remaining to expiration on "rolled from" series, well ahead of major premium decay.
    
  • 1.75 years remain to expiration on "rolled to" series.
    
  • Determine adjustments to portfolio
    
    • Consider replacement if perceived better opportunities exist.
      
    • Rebalance positions to beginning LEAPS-to-Cash allocation during annual roll.
  • Hold positions for a year and a day for favorable tax treatment if trading in a taxable account. (I'm trading in a Roth IRA.)
    
• Investigating increasing Buy SAFE % on subsequent buys and reducing on subsequent sells (to a 10% floor) (similar to what Tom has explained for individual (non-ETF) issues.) Currently, +10% on subsequent buys and -10% of subsequent sells, to the 10% floor, will likely work with the volatility of options.

Re: Cash balances. I can absolutely have it both ways. WBA's cash position was -145% in August, but total % Cash of the portfolio has never been below 29% and typically higher.

AIMStudent

Fuzzy,

Based loosely on Jeff's work. There are a number of things I don't like about his approach that I'll be modifying in 2020. The high cash balance, as you've noted, is one of those.

Rules and guidelines are currently a work in progress. Jeff advocates at least two contracts minimum per transaction. I've found that doesn't work very well and am looking at percentages as a possible solution. This year based on trading activity I'm comfortable in the ~5%+ range.

In some instances you are correct. I started WBA (the poster child for me for this system this year) with nine contracts and it has been a grind. With the precipitous drop I was holding more than 40 contracts at one point with a large negative cash balance, but WBA has since recovered and I'm holding less contracts. However, if the underlying had moved in the other direction my sell levels would have been uncomfortable holding only nine initial contracts. On the other hand, GE, at a fairly low initial entry price, allowed me to establish the position with more than 30 contracts giving me a lot more latitude. GE accumulated over 60 contracts at one point, but has had a number of sells since late October.

AIMStudent

YTD results of AIM LEAPS portfolio
• Initiated in Feb'19
• Stock universe is large US, high cap companies that have some amount of perceived stabilization.
• All options written on the Jan'2021 expiration.
• All options purchased as close to At-The-Money as possible.
• Corresponding option price needed to be low enough to purchase at least 10 contract, preferably 15. (Thus corresponding to lower priced, lower volatility stocks.)
• Initial LEAP to Cash allocation was 67% / 33%.
• Buy & Sell SAFE both initiated at 10%.
• Attempted to add additional issues every few months to diversify across industries; however, with rising prices in my universe I haven't found additional issues I want to acquire.
• % Cash in green represents cash holding above initial commitment of 33%.
• % Cash in red represents a negative cash amount.
• Using the 30-day rule between subsequent buys.
• No rules for subsequent sells.
• Minimum trade order ~5% - 6% of value of total contracts held for each issue.
• I HAVE FOUND THE NEED to modify Buy SAFE % on subsequent buys, but still working on methodology. (Example, WBA LEAP price was $9.15 on initial acquisition with subsequent buys down to $1.68)
• Planning to roll to Jan'2022 expiration in December.
• Researching issues to roll, add for 2020.



AIMStudent

Hi Tom, Re: One of my sandbox stocks...

From the graph, it appears the "30-day buy" heuristic was in affect as buys seem to be spread out during Oct, Nov, & Dec of last year. It further appears you have a similar sell heuristic, but difficult to tell based on the resolution of the graph. I can't recall seeing in any of your posts that you have a similar heuristic on the sell side. Do you, so you aren't raising cash too quickly in rapidly advancing market?

Thanks,
AIMStudent

Re: Tax Planning...

Hi TF,

Thanks for putting this together. I'm still a few years off, but looking at tax planning is always a useful exercise. I have a question concerning this statement: "In all likelihood mear mortals will remain in 10% tax bracket above that."

I believe based on your calculation that the $39,375 amount is what is carried down to 1040 Line 10, Taxable Income. This is after the identified deductions are removed from the gross amount of $53,225. (I'm using 2018 tax tables.) The remaining taxable income amount pushes into the 22% tax bracket, thus any additional non-LT cap gains income (wages, ordinary divs, ST cap gains) would be taxed at the 22% rate up to $82,500, not at 10%. Any additional funds for living would need to come from savings or non-taxable investment sources.

Or did I miss something?

Thanks again!
AIMStudent

Re: Jeff's new book...

Read the first six chapters in detail, skimmed chapters seven through ten. Sorry Jeff if you are monitoring this forum, but I was disappointed in so many levels...

Re: Options and AIMing...

Hi Tom,

As mentioned previously, the primary portfolio I trade options in I approach as an option seller, so I'm looking for time decay on the positions. Thus, I never get more than 100% gain on the premium if the option expires out of the money.

That portfolio consists of generally holding 12-15 issues of well capitalized companies with a strong dividend history and good EPS growth over the last 4+ quarters (generally). I look for company's priced under perceived fair value. The forward dividend yield typically provides a price floor and I look for yields ~50 basis points above the current 10-year treasury note. Once I get in I sell calls and puts against the position on an opportunistic basis. This provides good cash flow and in addition to the dividend helps reduce the cost basis for positions I'm interested in holding longer term and want to accumulate. I'm limited in price on issues due to the need to trade in 100 lots to match option selling.

As an example, ABBV, which I started accumulating in Q4'16 at ~$60, now has a cost basis of just over $32/share due the option premiums, both CC & CSP, that I've sold as well as the dividends collected. I'm able to consistently produce ~10% - 14% annually cash-on-cash in that portfolio. HOWEVER, I'm targeting income in that portfolio so at times it will sustain large drawdowns, mid-Sep'18 to late Dec'18, for example. I ended up getting assigned on a number of CSP and as a result culled the portfolio down from 14 to 9 companies. But that's ok for this portfolio as the goal is income generation and I'm less concerned with the swings and losses it sustains as long as it continues to generate cash over time.

-AIMStudent

Re: Jeff's new book...

I haven't read it. I'll likely pick it up in Aug. Largest drawback I see with his implementation is capital required for the higher quality stocks (e.g. Dogs of the Dow) he recommends with available LEAPs. Spread across 8-10 positions with a sufficient number of options in each to be able to implement AIM would require quite a bit of capital.

Going out to the furthest available LEAP, as he suggests, and rolling with ~1 year remaining to expiration is definitely favorable from the standpoint of Theta, limiting premium erosion from the extrinsic value. Personally, I'm not a fan of buying Out Of the Money options and even At The Money options' movement is dampened relative to the underlying issue due to the 50% Delta.

I read Jeff's other book late in 2018. I've traded options for quite a few years, but favored premium selling and have never found a great system as a premium buyer. However, I believe this system has merit.

So, starting this past Feb I began to selectively implement the LEAPS strategy, buying a different issue across industries every ~6 weeks. I'm currently holding the following five issues, all with the Jan'21 expiration:
• BG
• GE
• INTC
• KO
• WBA

I've entered each position based on the following AIM criteria:
• LEAPS/Cash ratio: 67% / 33%
• Buy SAFE %: 10%
• Sell SAFE %: 10%
• Minimum Contracts to Buy: 1
• Minimum Contracts to Sell: 1

Individual Statistics
• Best Gain on Initial Investment: 106.1%
• Largest Cash Position: 61.0%
• Worst Drawdown on Initial Investment: -44.7%
• Largest Cash Drawdown: -18.1%

Portfolio Statistics
• Total Gain on Investment: 23.8%
• Percent Invested: 57.1%
• Percent in Cash: 42.9%

-AIMStudent

Hi SF, Dividend Payout Ratio

Dividend Payout Ratio = Dividends Paid / Net Income (or Dividends Per Share / EPS)

Lets assume the Payout Ratio is 50%. This means the company is returning 50% of total Net Income to the shareholder in the form of Dividends with the other 50% going to Retained Earnings.

Now assume the Payout Ratio is > 100%. This means the company is paying out over 100% of Net Income for the period. Where does that additional capital come from? Generally from Retained Earnings (or from capital raised in debt offerings.) Either way, it is tantamount to "spending beyond your means" which generally is not sustainable long term.

As an example, DX has a Payout Ratio of 302.4% of Net Income. How long is that sustainable?

Re: REITs for Income...

May want to investigate further. Some on this list have a Payout Ratio in excess of 100%.