Taking What The Market Gives Us

There have been two drawdowns over 10% in the NASDAQ this year. I though it would be interesting to show how our target weight in our TQQQ (3x NASDAQ 100) position has evolved through these periods.

The chart below compares QQQ’s year-to-date return with our changing target weight in TQQQ.

Our TQQQ allocation is designed to replicate the exposure of a short position in a -3x Nasdaq ETF. We attempt to profit from the decay that comes with daily reset volatility. As explained in our White Paper, this is a more practical solution than trying to short a -3x ETF directly.

There is also an element of volatility targeting that goes into our target weighting.

The result has been a TQQQ target weight ranging from as low as 9.3% following QQQ's hockey stick rebound in August, to as high as 44.5% during the slow drawdown of March. We take what the market gives us.