Buy to close TLT July 127/129 put vertical spread for a net debit of $1.28, or better.
Buy to close SPY July 125/127 put vertical spread for a net debit of $0.05, or better.
Buy to close IYR July 57/59 put vertical spread for a net debit of $0.04, or better.
Let's review the July performance. We notched a gain of more than 20% this month on the capital risked in these spreads. Since the standard deviation of monthly returns is fairly high, I think it makes sense to allocate only a quarter (or less) of an account to the strategy. For example, if you have $10,000 to devote to this strategy, only $2,500 would be risked in total on the trades for each month, since you would want to be able to survive a period of several back-to-back losing months. Given that assumption, the return this month was closer to 6%. The strategy is still underwater so far this year, but as I often emphasize, tactical asset allocation is a long game.
Next, we're going to enter the indicated trades for the August expiration cycle, as follows:
TLT: 5 units
SPY: 3 units
IYR: 5 units
This is actually the same exposure that we had in place for July. So, we will be rolling forward to August and adjusting the strike prices. To gain this exposure, we will enter the following positions:
August Opening Trades:
Buy to open 5 TLT August 125 puts for $1.73 and sell to open 5TLT August 127 puts at $2.66.
Buy to open 3 SPY August 133 puts for $1.94 and sell to open 3 SPY 135 puts at $2.58.
Buy to open 5 IYR August 63 puts for $0.91 and sell to open 5 IYR 65 puts for $1.57.
I check in on the model each Friday afternoon to see whether any stops have been triggered, and while these August trades are open I will post weekly updates in the comments section here.