How I made a 40.15% Profit in July

I just racked up a +40.15% profit in July, with all 26 round trips making money and another six trade alerts profitable but unrealized.  It is the best month in the 20-year history of the Mad Hedge Fund Trader. This is against an S&P 500 (SPY) average that was essentially unchanged.

I didn’t take any wild or insane risks to bring in these blockbuster numbers. There was no betting of the ranch here. I execute a strategy that I have been developing over the last 50 years.

I carefully balanced long and short positions. I bet some industries would succeed while others would fail. I employed the most aggressive risk control I have ever executed. I was only 100% fully invested for a few days, mostly maintaining an ample cash position I could put to work in special situations.

I made several crucial assumptions in June. I bet that technology stocks (XLK), especially semiconductors (SOX), were dangerously overbought and due for sharp selloffs. The SpaceX (SPCX) IPO in particular was over promoted, was pushed too high by speculators and was a generous source of short positions.

On the other hand, sectors long ignored by the market, like biotech (IBB), (REGN), health care (XLV), and industrials (XLI) suddenly came to life. Financials (MS), (GS) continued a great run that began a year ago. Software stocks (MSFT) seem to be bottoming out.

There was even a big rotation within the Magnificent Seven, into Apple (AAPL) and out of the other six. This is because Apple has preserved their enormous cash flow while the rest sacrificed theirs to the AI buildout.

The indexes themselves, like the S&P 500 (SPY), NASDAQ (QQQ), and the Russell 2000 (IWM) would go nowhere since active sector rotation under the surface was still keeping money in the market, not taking it out. That set up nice shorts for the (SPY).

Finally, thanks to my extensive on-the-ground research in the Persian Gulf in March, I believed that any selloff in oil was temporary at best and a big rally in the energy sector (USO), (XOM), (OXY) was coming. That happened. I think the Iran War is going to go on indefinitely and you should be buying every dip in energy (XLE).

Sometimes the black swans go your way. The emergency forced liquidation of the Situational Awareness hedge fund dumped millions of shares of Micron Technology (MU) at market, making my shorts there look like a stroke of genius.

Every one of these assumptions proved accurate. Sometimes, everything works. As I keep repeating, the harder I work the luckier I get.

I got a big tailwind from unprecedented market anomalies that I, but few others, spotted. Options implied volatilities are at record highs, vastly increasing the profitability the options spread strategy I employ. Suddenly, the profitability of my positions doubled.

I’ll keep pursuing this strategy as long as it works. Could this become my first 100% year?

We shall see.

Good Luck and Good Trading, 

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader