Practical Momentum – Conclusion

Recap

We began the exploration of a practical way to execute momentum using derivatives. We found that:

1. A lookback period of one year works best (Part I)
2. Because of survivorship bias, long-short underperforms long-only (Part II)
3. Hedging with single-name put options doesn’t work(Part III)
4. Larger long-only portfolios have smaller drawdowns and better performance than smaller long-only portfolios (Part III)

Conclusion

The way things stand, Momentum is best executed using a broad basket of stocks. There is no mechanical way to maintain a momentum driven derivative portfolio. You can explore long-only equity momentum here.