AIM UK

[ls7550]

For reference, using the 13000 current Dow, 11,500 first down leg (go 50% in) arrangement as per outlined in the iBox example, such a 13% up, 11.5% down (1.13 * 0.885 = 1) pair has historically encountered one round cycle per annum since 1928 when using time value discounting.

So if you had bought 50% in and then sold 50% out making a 13% gain once each year that's an average volatility capture element benefit of 6.5% p.a. On top of that you would also have benefited from an element of inflationary uplift (capital appreciation benefit) provided by the stop-loss side of the pair.

Even assuming just cash deposits being used at a rate of 5% and assuming an average 25% volatility capture stock exposure level (26% ROCAR) then such a pairing would have averaged around 6.5% + ( 0.75 * 5% ) = 10.25% p.a. which is near comparable (or in excess) to the total return that 100% buy-and-hold achieved.

And that's for something as mundane as the Dow. With a blend of individually managed more volatile holdings likely that volatility capture benefit would be enhanced.