TQQQ Hedged Strategy (Model Coming Soon)
Before I talk about my strategy lets looks at some data:
TQQQ - 10% Drag With A 10% Buffer
Each year: return = TQQQ return − 10% drag, floored at −20%.
2015: 17.23% − 10.00% = +7.23%
2016: 11.38% − 10.00% = +1.38%
2017: 118.06% − 10.00% = +108.06%
2018: −19.81% floored at −10.00%, minus 10.00% drag = −20%
2019: 133.83% − 10.00% = +123.83%
2020: 110.05% − 10.00% = +100.05%
2021: 82.98% − 10.00% = +72.98%
2022: −79.08% floored at −10%, minus 10% drag = −20%
2023: 198.26% − 10.00% = +188.26%
2024: ~58.23% − 10.00% = +48.23%
Annual returns of TQQQ since 2015. Go to Yahoo Finance to learn more about TQQQ or visit the ProShares website.
2. Growth of $10,000 (2015 → 2024)
Let’s compute: Starting with $10,000
2015: 10,000 * 1.0723 = $10,723
2016: $10,723 * 1.0138 = $10,870
2017: $10,870 * 2.0806 = $22,618
2018: $22,618 * 0.80 = $18,094
2019: $18,094 * 2.2383 = $40,499
2020: $40,499 * 2.0005 = $81,018
2021: $81,018 * 1.7298 = $140,144
2022: $140,144 * 0.80 = $112,115
2023: $112,115 * 2.8826 = $323,182
2024: $323,182 * 1.4823 = $479,053
CAGR (Capital Annual Growth Rate) = 47.24%
3. S&P 500 (SPY) for comparison
Annual returns:
2015: +1.25%
2016: +12.00%
2017: +21.70%
2018: −4.56%
2019: +31.22%
2020: +18.37%
2021: +28.75%
2022: −18.17%
2023: +26.19%
2024: ~+24.89%
$10,000 → $33,969
CAGR (Capital Annual Growth Rate) = 13.01%
Results
Hedged TQQQ: $479,053
S&P 500 (TR): $33,969
Our hedged TQQQ returned 14.1x more than the S&P 500 after 10 years.
With rates about to be lowered expect assets to increase substantially in value. Technology is not going away, it will only increase in importance in our world. We maximize your returns by using leverage but every 12-18 months we hedge you and write covered calls to boost your returns.
The strategy is able to achieve the returns it gets because of leveraging 3x the QQQ.
Over The Next 5-7 Years…
Assumptions
S&P 500 Baseline: 4%–5% CAGR (Finimize / conservative forecasts).
QQQ (Nasdaq): Historically outperforms S&P by ~2–3% CAGR → baseline 6%–8%.
TQQQ (3× leverage): Gross 18%–24% CAGR before costs.
Strategy Adjustments:
−10% annual drag for hedge costs.
Downside capped (no worse than −20% in a year).
Net effective CAGR ≈ 8%–14% depending on Nasdaq strength and volatility drag.
Growth of $100,000 Over 5 Years
Insights
Even in the low case (8% CAGR), the strategy beats the baseline S&P 500 (4%–5% CAGR).
In the mid-to-high cases (11%–14% CAGR), the portfolio could nearly double the S&P 500’s return.
The 10% hedge drag dampens gains, but the protection against a catastrophic drawdown (like 2022 Nasdaq’s −33% or TQQQ’s −76%) means we survive to compound longer.
The hedged TQQQ approach is positioned to outperform the S&P baseline by a wide margin in most realistic growth scenarios, with the hedge providing a “survival shield” if markets stumble.
Some things to note:
The management fee has not been taken into account.
The covered call writing income has not been taken into account.
The drag can vary, it most likely will not average out to 10% per year. Some years it could be 10% and other years it might be 12%. It just depends on how expensive the puts are at the time we decide to hedge.
If we do not get the growth that could adversely affect the performance. If the market goes up a ton or down a ton that is where this strategy shines. If the market stays stagnant that is where the returns could suffer. If the TQQQ only returned 7% one year and we have drag of 10% that means in this situation we would actually have a -3% return.
Past results are not indicative of future success. Nothing is guaranteed when making an investment. Only thing that you could say is guaranteed and the regulators hate that word is the hedge. If we have a catastrophic market event and the market is down 35% we have our PUTs. We can either exercise them and sell them at our strike price or we could sell the PUTs in the market. In a 2022 scenario while the TQQQ is down almost 80% we have our losses capped at 10% plus the cost or drag of approximately 10%. Most you could lose in this scenario is the price paid for the PUT and the 10% downside so 20%.
The numbers above while they are real historical data they wont be that clean. Volatility, timing, cost of PUTs, length of PUTs… all of that will have an influence on returns.
Valuation are extremely high right now, everything should regress to the mean eventually. If you want to take high risk I advise you hedge yourself. The strategy is aggressive. It is 100% risk on plus it has leverage. I would not advise you use this strategy unless you are hedged. Bill Hwang, the convicted fraudster that had tons of leverage from multiple banks didn’t properly hedge. He went belly up because of all the leverage he used. If you are going to buy the TQQQ hedge yourself.
If it is my personal money I would rather get rich slowly and not have as much volatility. I am okay when it comes to my own money getting S&P 500 like returns. Some people like to take more risk, this strategy is for you then. We can tailor your portfolio like a custom suit to fit you and your needs.
