Trading Edge 72
Instrument/asset
Long Term Treasuries (TLT)
Trading rules
The trading rules of the edge read like this (please also backtest yourself – you might find a way to improve it):
- Today is the last day of the month – go short at the close.
Results
(You must take into consideration that TLT pays a dividend on the lat day of the month. You as a short seller need to pay this to the lender of the shares you borrow and sell short. The backtest below is adjusted for this.)
Below is the table if we hold for N days (remember – this is SHORT):
The best results are when we cover after 7 trading days. This is what the equity curve looks like:
A bit erratic, but still pretty good considering it’s a short strategy.
Improved strategy
The strategy improves if you add a volatility filter, for example, filtering SPY into bull and bear markets (bear markets are more volatile than bull markets).