Isonomy Turbo

The Isonomy Balanced series:
--- http://Isonomy.collective2.com, Cautious Balanced - Unexciting but relatively safe, easy to understand and follow.
--- http://IsonomyPlus.collective2.com, Enhanced Balanced - Enhanced version of Isonomy for higher returns.
--- Isonomy Turbo, Aggressive Balanced - this system. Most aggressive of the three systems for highest returns.
I am trading this in my own live account.

NOTE ABOUT EQUITY CHART

In the chart above, the gray line represents historical performance without charges. The blue line takes into account broker commissions (which scale with account size) and subscription fees (which do not scale). At the minimum $10,000 starting capital the subscription fees are a significant proportion of account size, which is why there is such an increasing discrepancy between the gray line and the blue line.

Had I run exactly the same system starting at, say, the $50,000 level (with of course 5x greater trade sizes) instead, the blue line would now be much closer to the gray line. Keep in mind that the larger account size you trade, the smaller the drag effect of the subscription fee and the closer your real results are to the gray line. This applies to any system on C2, not just this one.

About to subscribe?
Enter the following coupon code on the subscription form to receive a 50% discount for the first six months after your trial period runs out:
UGSG49244

TARGET

To return as much as possible long term while keeping risk of permanent loss at bay. The rough target is 25% compound per year.

If this does not seem like a worthy target, remember that the Isonomy series are intended for the long term . That means the target is 25% per year on average over many years .
Just to illustrate that 25% is actually rather a lot: At 10% per year $10,000 turns into $41,800 over 15 years, but at 25% $10,000 turns into $284,200 - almost seven times more!

DESCRIPTION

Isonomy Turbo works with a combination of Silver (or other precious commodity), Stocks and Bonds.

However, instead of buying the stock (ETFs) we buy and sell a combination of options on each underlying asset. This way we can arrange the resulting risk/reward curve to give us a good chance of making money in a variety of conditions, and some protection should prices go against us in the shorter term.
Simplified result: we profit if the stock price rises or even just stays the same. If the price falls, insurance is in place to limit losses.

As in Isonomy and Isonomy Plus, the principle is that sufficiently different asset classes do not usually move in step for long and so by keeping our money allocated between different asset classes, and re-balancing from time to time, we can smooth out our returns over the long term. Various studies have shown that such diversification reduces volatility.

But in Isonomy Turbo this asset balance is the basis for a more speculative approach, though with protections in place. Please note that, as mentioned above, Isonomy Turbo is based on building compound positions from several option legs which together offer profit potential and limited risk. Therefore some trades are expected to be losers. These are usually the risk-limiting (insurance) legs... think of them as paying an insurance premium.

We expect greater long term return than Isonomy or Isonomy Plus and, potentially, greater short term volatility as well. High volatility is to be expected from time to time. Drawdowns and flat periods are quite normal and will usually happen either in times of steadily reducing market volatility, or when there is correlation between two or more of the asset classes during a down move. These periods may take just days or months to play out. Max drawdown is expected to be under 30% although of course this cannot be a cast-iron guarantee.

Trading is more frequent but still not so much as to incur excessive trading costs, perhaps twenty-five to forty trades per year. Signals may come at any time of day but if you are off-line for a while and not auto-trading there is no need to panic - placing the trade a day late should usually not cause much deviation from performance as measured by Collective 2.

CUSTOMISATION

It is highly recommended that you do not pick and choose individual trades unless you are quite sure you know what extra risk you may be taking on by doing so. This also applies to already open positions when you start trading; you should open all of them when you start. One caveat there is that you can safely omit any trades to open a short position that is worth very little and is already close to expiry.

As mentioned above, some positions are there as insurance. If you omit those you may be left open to a wipe-out unless you set your own stop-loss. Isonomy Turbo assumes a balanced compound position and therefore does not use stop-losses.

If you would nevertheless like to customize (e.g. to tie up less capital) then the safer way is to trade only one or two underlyings instead of all three. Isonomy Turbo capital is split roughly one third in each underlying. So for example you'd trade only the QQQ options or only TLT options.
However, doing this will increase your volatility and frequency of drawdowns.

One of the underlying principles of the Isonomy systems is to rely on short term market prediction as little as practicable. Timing entry into or out of the system, or timing trades to get better prices, is possible but usually not recommended.

REQUIREMENTS

~ This system should be traded with at least the current "total system equity" (it started with $10,000) as shown by the end of the gray line on the chart above or in the Model Account Status box (when logged in to C2). You can trade with more, but less is not recommended.
See the Customisation section if you'd like to trade with less.

~ Make sure you scale your trades accordingly. For instance if the current system equity is $10,000 and the signal is to buy 5 option contracts, then with $20,000 in your account you would buy 10 contracts, and with $5,000 you would buy 2 - round down if possible or you may not have enough funding to open all legs.

~ I recommend that you try to start your account size (and trade scaling) in exact multiples of the current system equity. So for instance, if the current system equity is $10,000 then trade your account with $10k or $20k or $30k... etc.
You don't have to stick to this, but it should ensure that your account follows the system exactly.

~ Important: If you start trading this system manually you should place trades to open all currently open positions. If you autotrade then this should be done for you automatically. In some cases it is safe to omit old positions that are worth almost zero. If in doubt, ask me first.

~ You will need an options trading account with your broker which allows you to buy and sell spreads. You will not need to sell naked calls but naked short puts may be used rarely.
At OptionsXpress the required account permission is "Trading Level 4".

~ Make sure you are able to open all trades . It is important that all legs of the compound positions are in place because they work together to construct the desired risk-reward curve. Missing some legs out may expose you to a much greater level of risk.

~ No margin is used. Leverage is implicit in the way option pricing works. The portfolio may be leveraged up to 4x but rarely more than that.

~ If you want to gear down you can do so by trading with more than the current system equity but without scaling up the trade quantities as much.

NOTE: When you first start trading this system and you open all the currently open positions (there may be 10 or 12) then you may see an immediate drop in your account of a few percent. Unfortunately this is quite unavoidable due to the relatively high bid-ask spread on options prices. However, over a couple of months that blip will become more and more insignificant compared to the normal up/down gyrations of the portfolio.

Please use the system forum or contact me directly if you have any questions.

CREDIT CRISIS

Below are back-test results of how this system may have performed had it been running just before, and during, the Credit Crunch. Of course, these are only approximated hypothetical results derived after the fact and should be taken as such.

Year....Isonomy Turbo....S&P500
2005.........39.0%..............9.8% (Jan 05 - Jan 06)
2006...........9.5%............14.2%
2007.........28.6%.............-2.7%
2008..........36.3%...........-38.2%
2009.........14.1%............41.0%