In case it wasn’t obvious, we are in the strongest rally ever. I’ve seen a variety of graphics circling the web, chronicling just how historic the ascent has been, but this one might be my favorite. It was tweeted out by Ryan Detrick of LPL Research.

The bottom row shows the current 50-day rally clocking in at an astounding 37.7% gain. As all the previous instances show, these type of monster runs usually lead to more gains in the intermediate-term.

Now that we’re on this side of what was undoubtedly a wicked roundtrip, I want to gather my thoughts on lessons learned.

Why, oh why did I sell Covered Calls!?

First up, the speed of the recovery made anyone who reduced risk or lowered exposure in March look foolish if they didn’t rapidly jump back in. But that doesn’t mean their actions were ill-advised. I’d caution against passing judgment on a technique or strategy if it didn’t work this time. Remember, it’s all about if it works over time.

For example, I fell like a buffoon for selling covered calls on underwater stock positions over the past two months. All I’ve done is lost money on the short calls. Again and again. It’s stunted the portfolio’s growth and extended how long it’s going to take me to recover.

In my defense, I have been quick to roll up the calls as the strikes were reached. I’ve also only sold partial covered calls in some instances (1 call for every 200 shares). But still, I wouldn’t have been way better off just remaining long stock.

That said, Here’s why I still stand by the tactic.

One: In an alternate reality where the S&P didn’t run like a scalded monkey, my covered calls would have generated outperformance.

Two: Selling covered calls made it easier for me to weather the volatility inherent with owning stocks.

Three: I succeeded in regret minimization. For me, not having covered calls during a market drop generates more regret than having them on during a rally. Thus, I’ve experienced regret during the past month, but not as much as if I failed to sell calls and the market crashed.

R.I.P. Condors

Experiencing the fastest bear market in history was a shot at the heart of any condor system. But to follow it up with the biggest rebound ever was just the worst. I laid my June and July positions to rest last week. Given the abnormally high death rate of my feathered friends this year, my graveyard is filling up fast.

I’m not going to sugarcoat it – 2020 has been extremely trying for condors. These are situations where coupling the condor with a trend-following system or hedging can help soften the blow. I know owning IWM shares has helped immensely over the past few months.

Better times loom for the Condor system. All prior instances of losing streaks have given way to a healthy bout of winners. I’m expecting the same this go around and will deploy August when the time comes.

Price Pays

This entire episode has proven to me for the millionth time that following price is the only sane way to trade. Investors mired in depressing economic data have completely missed out on the recovery. The price chart turned bullish on April 7th and short of a few signs of weakness in mid-May, it’s remained bullish ever since. If you’ve remained bearish the entire way up, then you need to rethink what data you’re using to determine portfolio bias.

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