Agora Outlook option selling strategy

Agora Outlook is a company started by Ken Davidson. They feature a strategy of option selling, using outright selling and credit spreads on the cash indices. It is subscription-based.

The returns shown on their website are market crushing. Since 1990, the lowest return has been 48% in the 'regular trades' system, which occurred in 1998. Every other year has been higher than that, with several years returning over 100%, and the average return is 134%!!! The best part is that the system has been working since 1990. These are not hypothetical backtested returns!

Unfortunately, the site does not give details on drawdowns or the leverage used. Usually, option selling strategies have a high win % and high leverage, which means that every once in a while they get whacked pretty good.

Agora probably uses a sophisticated timing model to enter into trades. The cost is not too bad, $100 per month or $1000 per year (for retail investors). They donate most of the subscription proceeds to charity, which means that Agora probably makes more money trading than they do selling the subscription.

This strategy would not be for risk-averse or inexperienced traders, due to the leverage involved.

James O'Shaughnessy - Cornerstone Growth Screen

Since our last post on James O'Shaughnessy's Tiny Titans was so popular, we figured it's time to feature another one - The Cornerstone Growth Screen. We have used performance history from AAII, American Association of Individual Investors.

James O'Shaughnessy's Cornerstone Growth is a mechanical stock screen that uses several factors to find winning stocks:


Price/Sales ratio less than 1.5
1 year EPS growth > 0
3 months relative strength > 50
6 months relative strength > 50
Ranking: 12 months relative strength

Here's the Market Crushing returns from AAII's website (one caveat: it's possible that the AAII screen may differ slightly):

1998: 19.4
1999: 19.5
2000: 11.5
2001: 19.2
2002: 10.1
2003: 90.3
2004: 45.1
2005: 14.4
2006: 17.2
2007: 12.6 - as of 11/30/07


The lazy investor's option: Buy HFCGX, a mutual fund from Hennessy which follows this strategy.

Here's a performance summary from Smartmoney's website. As you can see, it crushes the S&P 500, especially in the bear market years.

Here's Hennessy Funds website, which features HFCGX and others.

Market Timing model: Timing Cube

Despite the negative connotation, we at Crush the Market wholeheartedly believe in MARKET TIMING. Today, we feature a subscription-based black-box timing model, Timing Cube. If you visit their website, they have all sorts of timing products, but we'd like to show the market-crushing results of timing the Nasdaq 100 long only:

2007: 2.6%
2006: 12.7%
2005: 12.2%
2004: 17.0%
2003: 49.1%
2002: 6.4%
2001: 30.1%
2000: 28.1%
1999: 104.6%
1998: 105.0%
1997: 32.8%
1996: 44.6%
1995: 40.1
1994: 8.8%
1993: 11.5%
1992: 18.1%
1991: 65%
1990: 12.9%
1989: 26.2%

More results are available at their website, along with more strategies.

Speaking of market timing, everyone times the market. I suspect that with the Dow futures down 350 points this morning, a lot of people will be using fear and panic, instead of a strategy, to time the market tomorrow.

Five Hedging techniques to protect against a declining market

With all the ugliness in the market out there, we thought a post on hedging might be appropriate.

Scott Rothbort wrote a great article at thestreet.com which details 5 hedging techniques:

• Pairing
• Short against the box
• Exchange-traded funds (ETFs)
• Futures
• Options

We think Scott left off an important one - cash! Unless you're running a billion-dollar hedge fund, you can easily raise cash by reducing your positions.

Chuck LeBeau's 'Remarkable S&P Trading System'

Chuck LeBeau's Remarkable S&P Trading System is a Tradestation swing trading system that is featured on his website. The website appears to have not been updated in several years, but these older systems could be an absolute gold mine if they forward-test well. Here's a snapshot of the system's equity curve from 1988 to 1998. Looks like a market-crushing strategy to us!

Make 'Mad Money' the easy way from Jim Cramer

Jim Cramer, host of the popular 'Mad Money' TV show on CNBC, is an entertaining guy who has a great track record and lots of experience on the street. If you missed his blowup earlier this year, you can catch it on Youtube.

Cramer is a smart guy who can pick stocks with the best of them. However, his viewers can be like sheep and buy what he says to the next trading day. This creates an anomaly where 'buys' get short-term overbought and 'sells' get short-term oversold.

In the paper The Performance and Impact of Stock Picks Mentioned on 'Mad Money' , Bryan Lim and Joao Rosario study the behavior of these buys and sells. Take a look at the chart below and ask yourself, how could I make some money one or two days after the show airs? I bet you can come up with a market-crushing strategy. If you need help, check out CXO Advisory's article on this paper.

James O'Shaughnessy's Tiny Titans

Let's get this started with a good kick with a screen from AAII, American Association of Individual Investors.

James O'Shaughnessy's Tiny Titans is a mechanical stock screen that looks for cheaply priced micro-cap stocks.

Market capitalization between $25 million and $200 million (inflation adjusted). Lowest price-to-sales ratio and lowest price-to-cash flow ratio; and the highest dividend yield. Then choose the top 25 with the greatest twelve month relative strength.


Here's the Market Crushing returns from AAII's website:

1998: 38.1%
1999: 53.8%
2000: -6.6%
2001: 84.1%
2002: 51.9%
2003: 154.8%
2004: 45.8%
2005: 7.5%
2006: 35.2%
2007: 1.5% - as of 11/30/07

Welcome to Crush The Market

Welcome to Crush The Market - Every week, we feature an existing investing strategy that crushes the market:

- Technical analysis
- Stock screens
- Forex trading systems
- Backtesting
- Why individual stock picks(such as listening to Jim Cramer's Mad Money) don't generate consistent profits.
- Quantitative trading systems
- Hedging techniques
- Market timing techniques

This site is for new investors, experienced investors, traders, financial professionals, and everyone in between. You see, there are thousands of ways to crush the market, out there in the public domain. We find the best ones and bring 'em to you! What could be better than that?