SCQ Investment Thesis

 

This trading strategy seeks to balance high-return opportunities with sufficient risk management. It achieves this through leveraged equity sector ETFs, a bond portfolio rotation, and duration matching the bond portfolio.

The asset universe consists of the following: QLD, ERX, DNI, and SSO; all of these are leveraged ETFs in different economic sectors, and TBF, BIL, SHY, HYG, UGLD, which are bonds and a leveraged gold ETF.

The strategy uses a momentum based 20-day moving average (20-MA) to determine which sector ETFs have the required momentum to allocate capital towards. If the price moves above the 20-MA, those ETFs are invested in. If multiple ETFs trigger bullish signals, the position is sized via inverse volatility.

The bond rotation logic is applied when no equity signals are bullish. The bonds with the highest yields are purchased and subsequently immunized with a short treasury position, TBF. This helps balance interest rate risks on the bonds.

A stop-loss order at 4% below entry price and a take-profit order at 20% above entry price are included as well for further risk management in the strategy.


 

Author

Quant League Competitions

4 days ago