An Anzani 10-cylinder radial aircraft engine (image via Wikimedia Commons). 

Switching To Four Cylinders 

Six months ago, we changed the way we selected our top names. We had already determined that we could find alpha by using hedging cost to analyze options market sentiment. Among our top ranked names, securities that could be hedged against >9% declines with optimal, or least-expensive, puts expiring in approximately 6 months tend to significantly outperform those that couldn't be hedged that way over the next 6 months. We'd been calling those "AHP" ("Also Hedgeable with Puts") for short. What we did starting on November 20th was drill down further, looking at the performance of securities that were also hedgeable against even smaller declines with optimal puts. 

This has been upgraded to a full article which can be read on our mains site here.