11 Trading Days Left in 2021

As the year turns, its time to prepare for the last trading day of 2021 and especially the 2021 year end close at 4PM* Friday December 31st!  Let's look at how my hypothetical Model Account in 2021 went:

This was obviously a lucky year.... or was it? Let's look the same trade in the extreme year of 2020.

Not such a good year. The $100K model account lost ALL its value, and then some, in the Covid March break and had to post maintenance margin (totalling $40+K, not shown). The true believer though ended up with a net double ($100K gain) at year-end.

What about a more "normal" year, like 2019?

In the first half, the model account was up $50K, stayed unch until November, and then rose another $50K, posting a $100K gain for the year. 

So WHAT IS? this model account that has SO much risk yet apparently so many gains. Its simply a small variation on the long stock index buy and hold-but with the leverage of futures. Short answer: just look at the S&P and Nasdaq charts!

ES and NQ Buy and Hold

This is a hypothetical futures account, funded with a hypothetical $100K, that hypothetically buys, on the last day of the year, at the close, one "red" March S&P 500 E-mini futures and one "red" March Nasdaq 100 E-mini futures contract. The initial margin requirement for this position is today roughly $40,000. You post $100K, so you have $60,000 margin excess ($60K losses before you get a margin call).

As I write, noonish December 16th, 2021 the "red" March 2023 S&P 500 E-Mini, symbol ESH23, is offerred at 4740.00 and the "red" March 2023 Nasdaq 100 E-Mini, symbol NQH23, is estimated at 16,000. Both contracts should have firm offers by the December 31st last trading day of the year. 

At current pricing, ESH23 has a notional value of (4740 x $50=) $237,000. And the NQH23 is at (16,000 x $20)=$320,000. Being long at these prices would give ($237,000+$320,000)=$557,000 of index exposure (read risk) in your futures account. 

My broker's current initial margin requirement for the S&P E-Mini is about $16,000 and the Nasdaq E-Mini is $24,000. Thus the total margin requirement for this hypothetical account is roughly $40,000. The $100K deposit would leave an excess of $60,000 in the account.

Outlook

2022 appears to be a pivotal year with the first signs of inflation, the hyper politics of the mid-term elections and the twists and turns of the Covid pandemic. But we have HAD many pivotal years, especially in the Covid infected 2020. So 2022, despite all the hemming and hawing, may just be another year in the market. 

Happy Christmas, Happy 2022 and Happy Trading!

*"Red" means, in commodity talk, the next year's month not the upcoming month. Thus, today's "red" March means March of 2023, not the upcoming 2022. The March 2023 contract is nearest contract to trade during the entire year 2022. There are many details involved in the reasoning behind this kind of trading account. For more complete information showing markets and returns feel free to download my spreadsheet here. Note also, these are hypothetical accounts only.  

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@outlook.com to follow this blog and for additional information. 

© 2021 George Rahal.