Cumulative Return: Strategy vs. SPY Benchmark
January – December 2022 | Indexed to 100 at start of period
DRC Strategy
SPY Benchmark
Hedge Active
Monthly Return Comparison
Strategy vs. SPY — month by month
DRC Strategy
SPY Benchmark
Tier Contribution to Annual Return
Breakdown of return contribution by tier — full year 2022
Key Market Events & Hedge Deployment
Jan–Feb 2022
Initial Leg Down
Fed signals accelerating hikes. Growth equities reprice sharply. Momentum signal crosses threshold; puts deployed. Profits taken on two high-velocity down days in late January as SPY drops 4%+. Position reduced; cash rebuilt.
▲ Puts deployed, profit-taken Jan 24 & Feb 3
Mar–Apr 2022
Rally Then Second Leg
Markets recover ~11% from February lows. Puts not reloaded during rally — momentum signal does not confirm new bull regime. Second leg down begins April; puts redeployed on confirmed breakdown. Profits taken mid-April on large down day.
▲ Puts redeployed Apr 6, profit-taken Apr 22
Jun–Aug 2022
Summer Leg & Bear Rally
S&P reaches bear market lows mid-June. Puts generate significant gains; profits taken. Markets rally ~17% through mid-August. Puts not reloaded during rally. Powell's Jackson Hole speech reverses rally; puts redeployed Aug 26 on confirmed breakdown.
▲ Major profit-taking Jun 16, redeployed Aug 26
Sep–Dec 2022
Final Leg & Year-End Recovery
September is the worst month of the year. Put profits taken through October lows. Momentum signal softens; puts not reloaded into Q4 recovery. Tier II long calls on select Mag 7 names contribute positively through year-end stabilization.
▲ Puts exited Oct, Tier II calls contributing
Monthly Performance Detail
| Month | SPY Return | Strategy Return | Outperformance | Tier I Contrib. | Tier II Contrib. | Hedge Status | Market Regime |
|---|
Simulation Methodology & Assumptions
Active Put Management vs. Passive Overlay
This simulation models actively managed protective puts rather than a static buy-and-hold overlay. Key assumptions: profits are taken on days with SPY moves of 3%+ (approximately 12 such days in 2022); runners are managed with trailing stops set at 40% of peak option value; puts are not reloaded during bear market rallies unless momentum signal confirms new downleg. This approach captures realized gains rather than letting intrinsic value decay on recoveries.
Options Sizing & Tenor
Puts sized at approximately 3–5% of Tier I notional per deployment, 60–90 DTE. This tenor avoids the steepest theta decay while providing sufficient time value for bear legs to develop. With VIX averaging 25–32 in 2022, premium costs are estimated at 2.5–3.5% of notional per deployment. Six total put trades modeled across the year (initial buys, profit-takes, and reloads). (CBOE Put-Write Index methodology)
Tier II — Directional Calls & Equity Positions
Tier II held at 12–15% average during 2022. Targeted long calls on select large-cap names (energy, healthcare, defensive tech) contributed positively in a year where sector rotation created real alpha opportunities even as broad indices fell. Individual call positions sized at 1–3% each with defined max loss. Equity positions reduced to lower bound during bear regime months. (Momentum factor: Jegadeesh & Titman, 1993)
Regime Classification & Reentry Rules
Monthly regime tags assigned based on 50/200-day MA crossover, VIX level, and yield curve slope. Put reentry after a profit-take requires: (1) momentum signal still negative, and (2) at least 3 trading days of price action suggesting continued downside. This prevents whipsaw reentry during bear rallies. Eight of twelve months classified Bear; four Transitional. No month classified Bull. (Faber, 2007 — Tactical Asset Allocation)
SIMULATION DISCLOSURE — All performance data presented on this page is the output of a quantitative simulation model applied to approximate historical market conditions for calendar year 2022. Results do not represent actual investment performance, actual trading activity, or the performance of any real portfolio or account. Benchmark returns reflect approximate S&P 500 total return index performance and are provided for contextual comparison only. Simulated results are subject to known limitations including but not limited to: perfect foresight in regime classification, simplified option cost modeling, and absence of transaction costs, taxes, or slippage. Actual results would differ materially. Dazu Rock Capital is a demonstration vehicle for analytical and educational purposes only. This is not investment advice.