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Performance Update Of The Dynamic Asset Allocation Portfolio - February 2015

|Includes: SPXL, SPY, TLT, TMF, iPath S&P 500 VIX Short-Term Futures ETN (VXX), XIV

What a difference a month can make! Our dynamic allocation portfolio roared right back with 18.5% gain in February. From the beginning the year, our portfolio has been approximately flat. In February, the portfolio has benefited from leveraged rise of the SPY component. The large drop of VIX and ~7% contango between front month and second month VIX futures also helped the portfolio achieving good return during the month.

There was no trading signal triggered during the month. We replaced SSO with SPXL to increase the leverage of the SPY component. SPXL is a daily 3X S&P 500 index ETF, i.e. the ETF's daily return is three times of the daily gain or loss of S&P 500 index. Despite increase of leverage for the SPY component, we plan to keep the overall leverage of portfolio roughly unchanged by reducing weight of the VXX/XIV component.

Our overall thesis for this year remains unchanged. We envision moderate increase of S&P500 and elevated volatility comparing to the 2012-2014 period. Fed is about to raise interest rate later year. Historically, the major indices will still perform well because the economy and earnings will remain strong. Volatility, however, will likely rise and hurt performance of the VXX/XIV component. As indicated above, we plan to reduce weight of the VXX/XIV component based on this anticipation.

 

Holding 1

Holding 2

     

Date

ETP1

Share1

Buy price1

Current price1

ETP2

Share2

Buy price2

Current price2

Cash

Account value

G/L since inception

1/30/2015

SSO

4

131.42

120.42

XIV

12

28.57

24.97

10.38

791.7

-20.8%

2/27/2015

SPXL

5

86.79

93.37

XIV

12

28.57

32.75

78.17

938.02

-6.2%

Disclosure: The author is long XIV, SPY, SPXL.