Backtesting LEAPS Momentum Strategy in Bear Markets

Backtest my public portfolio across overlapping bear periods to see its best performance

I will backtest your Public Portfolio Challenge (ID: 69a7dc7acdb6bf6a4681d36c) across three major historical bear market regimes to evaluate its defensive capabilities and recovery speed.

Bear Market Regimes for Testing

1. 2022 Inflation & Rate Hike Bear: (2022-01-01 to 2022-12-31) - A prolonged period of declining equity and bond prices.
2. 2020 COVID-19 Crash & Recovery: (2020-01-01 to 2020-07-01) - An extreme volatility event with a sharp crash and rapid V-shaped recovery.
3. 2018 "Christmas Eve" Correction: (2018-09-01 to 2018-12-31) - A sharp late-year sell-off triggered by growth concerns and Fed policy.

The Plan

1. Fetch Portfolio Details: I'll retrieve the full configuration of the "Public Portfolio Challenge" to ensure the backtest uses your current rebalancing and long-call LEAPS logic.

   • Tool: Fetch User Portfolios

2. Execute Multi-Regime Backtests: I will run three separate backtests for the identified periods. I'll use SPY as the baseline for comparison and enable generateEvents: true for the 2022 period to audit how the SMA(50) and regime filters behaved during the most recent major stress test.

   • Tool: Backtest Portfolios

3. Analyze and Compare Performance: I will read the results for all three periods, focusing on Maximum Drawdown, Sortino Ratio, and Recovery Time. This will reveal the portfolio's "best performance" in terms of capital preservation and the speed at which it regained its high-water mark.

   • Tool: Read Backtest

4. Final Summary: I will present a comparative table of your portfolio's performance across these bear markets and provide an assessment of its structural robustness.

Fetch the 'Public Portfolio Challenge' with ID 69a7dc7acdb6bf6a4681d36c, including chat portfolios, to retrieve its current strategy configuration and rebalancing logic.

Here is your portfolio analysis as of the latest snapshot.

Performance Summary

Name	Type	Total Return (%)	Sharpe Ratio	Max Drawdown (%)	Alpha vs SPY (%)	Current Value
Public Portfolio Challenge	live (Public)	16.56	1.96	12.18	+7.49	$29,139.36

Return period: Mar 9 – Jun 12, 2026. SPY returned 9.07% over the same window.

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Position Analysis

All five positions are long call LEAPS (150–365 DTE) on individual names. Weights are approximate based on current market values.

Ticker	Weight (%)	DTE	P/L (%)	Fundamentals (Key Data)
OSCR	13.6%	217	+76.8%	Revenue CAGR 57.1%; negative NI ($443M loss), P/E N/A, P/S 0.70 — high-growth but unprofitable; debt $430M (low), FCF $1.06B positive. Rating: 2.5/5.
HOOD	11.1%	276	+78.1%	P/E 45.0, P/S 18.5, revenue CAGR 25.3%; strong growth but premium valuation; debt $15.4B (elevated), EBITDA $2.2B. Rating: 3.5/5.
ANET	11.4%	213	+7.8%	P/E 55.9, P/S 21.4; revenue CAGR 32.2%, NI CAGR 43%; zero debt, FCF $4.25B — expensive but pristine fundamentals. Rating: 4.5/5 (highest).
COP	9.0%	213	–3.3%	P/E 19.6, P/S 2.5; revenue CAGR 6.7%, NI CAGR –0.5% (stagnant); debt $23.4B, FCF $16.8B — cheap but low growth. Rating: 3/5.
XOM	4.3%	213	–19.2%	P/E 24.3, P/S 1.9; revenue CAGR 4.0%, NI CAGR 5.8%; debt $43.5B, FCF $23.6B — stable, declining profit margins. Rating: 2.5/5.

⚠️ Concentration Risk: No single position exceeds 30% weight. The top three (OSCR, HOOD, ANET) total ~36%, which is moderately concentrated but acceptable for a LEAPS momentum strategy.

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Key Insights

1. Strong alpha generation in a short window. The portfolio outperformed SPY by +7.49% over ~3 months with a Sharpe of 1.96 — solid risk-adjusted performance. The two big winners (OSCR +76.8%, HOOD +78.1%) are driving the alpha; the other three positions are flat or negative.

2. Energy underperformance is a drag. XOM (–19.2%) and COP (–3.3%) are the weakest links. Both have low growth rates (NI CAGR ~0–6%) and unexciting fundamentals. Their LEAPS are decaying while awaiting recovery — energy has lagged the tech-heavy momentum in 2026. These positions represent 13.3% of portfolio and may need a rotation.

3. High-quality growth names are carrying the book. OSCR and HOOD are highly speculative (negative earnings, premium valuations) but their revenue growth trajectories (57% and 25%) explain the momentum. ANET is the “quality anchor” — zero debt, 32% revenue CAGR, and top analyst rating — though its 55.9x P/E is stretched.

4. No fundamental data suggests existential risk. All positions have positive (or near-positive) FCF except OSCR (FCF is positive at $1.06B despite losses – cash flow from operations covers capex). Debt levels are manageable. The biggest concern is XOM: declining NI CAGR, elevated debt ($43.5B), and a –19.2% LEAPS loss — if energy doesn't rally, this position could erode further.

5. Regime exposure is concentrated in growth/tech. Four of five names are either tech, fintech, or insurtech. The two energy tickers provide some sector hedge but currently hurt performance. The strategy is heavily tilted to momentum-driven names — which is working, but leaves the portfolio vulnerable to a rotation out of growth.

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Answer to Your Request

You asked to fetch the portfolio configuration and logic. Here is the rebalancing strategy summary (as deployed):

• Core Entry (Bull Regime): Rebalance into LEAPS (ATM, 150–365 DTE) on a 20-name watchlist ranked by 126-day ROC. Entry occurs every 14+ days when SPY is above 92% of its 252-day high.
• Dip Entry: Same logic, but fires when SPY < 92% of its 252-day high (every 7+ days).
• Crash Entry: Fires when SPY < 82% of 252-day high (prepared for severe drawdowns).
• Exit Triggers:
  • DTE ≤ 45 → roll/close
  • P/L ≥ +100% → unconditional take-profit
  • In regime (SPY strong): trim at +50% (if exposure >68%), +20% (if exposure >74%), even break‑even (if exposure >80%)
• Weekly AI Audit (runs Mondays or on SPY crossing below 200-day SMA): checks posture, drawdown brakes, order health, and condition integrity.

The portfolio is currently in bull-regime mode – SPY is well above the 92% threshold → entry is queue-based (every 14 days), take-profits are active at 50/20/0% thresholds depending on exposure. No new entries have triggered recently (5 positions, not fully deployed).

You're up +16.56% since inception, beating SPY by +7.49% with moderate drawdown. The biggest risk is the two energy LEAPS dragging; consider whether to rotate into higher-momentum names next rebalance.

Run backtests for the 'Public Portfolio Challenge' (ID: 69a7dc7acdb6bf6a4681d36c) across three periods: 1) 2022-01-01 to 2022-12-31 (enable generateEvents: true), 2) 2020-01-01 to 2020-07-01, and 3) 2018-09-01 to 2018-12-31. Use SPY as the baselineAsset for all three.

I'll create three backtest configurations for the Public Portfolio Challenge to evaluate its performance across historical bear markets. I've enabled event recording for the 2022 period to allow for a detailed audit of the strategy's defensive logic during that regime.

Read and analyze the results for backtests 6a2dfa1e0cd864658914e7eb (2022), 6a2dfa1e0cd864658914e7e8 (2020), and 6a2dfa1e0cd864658914e7e5 (2018). Compare total return, Sortino Ratio, and maximum drawdown for each period against the SPY baseline.

Bear Market Performance Comparison: Public Portfolio Challenge vs SPY

Below are the results for your Public Portfolio Challenge (LEAPS momentum strategy, 22% per name, 126-day ROC ranking, SPY regime gate at 0.92×max) across three historical bear stress tests.

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📅 Period 1: 2018 Q4 Correction (Sep 1, 2018 – Jan 1, 2019)

Metric	Portfolio	SPY	Difference
Total Return	+5.79%	–13.01%	+18.80% (alpha)
Sortino Ratio	1.16	–2.67	+3.83
Max Drawdown	13.08%	19.47%	–6.39 pp (lower drawdown)

✅ Best performance. The portfolio generated positive return while SPY fell sharply. The momentum filter and LEAPS duration allowed it to capture the sharp December bounce and avoid the worst of the sell-off.

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📅 Period 2: 2020 COVID Crash (Jan 1 – Jul 2, 2020)

Metric	Portfolio	SPY	Difference
Total Return	–9.16%	–2.50%	–6.66% (alpha)
Sortino Ratio	–0.88	0.06	–0.94
Max Drawdown	19.53%	33.70%	–14.17 pp (significantly lower drawdown)

⚠️ Mixed result. The portfolio lost less than half of SPY's peak-to-trough drawdown, demonstrating capital preservation during the crash. However, it failed to fully capture the V‑shaped recovery, leading to a net loss while SPY nearly broke even. The Sortino ratio was negative, while SPY's was marginally positive.

Likely cause: The regime gate (SPY < 0.92×max) may have delayed re‑entry, and the momentum ranking may have selected laggards during the rapid rotation out of growth names into energy/defensives in early 2020.

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📅 Period 3: 2022 Inflation Bear (Jan 1 – Dec 31, 2022)

Metric	Portfolio	SPY	Difference
Total Return	–35.76%	–18.17%	–17.59% (alpha)
Sortino Ratio	–2.61	–0.99	–1.62
Max Drawdown	37.00%	26.29%	+10.71 pp (worse drawdown)

❌ Worst performance. The portfolio suffered nearly double the loss of SPY with a deeper drawdown. The momentum strategy, which thrives in trending bull markets, was repeatedly whipsawed by the volatile, non‑trending bear market of 2022. The LEAPS positions decayed while the SMA(50) entry filter added false signals.

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Trends Across Bear Markets

Period	Portfolio Return	SPY Return	Alpha	Portfolio Max DD	SPY Max DD	Portfolio Sortino
2018 Q4	+5.79%	–13.01%	+18.80%	13.08%	19.47%	1.16
2020 Crash	–9.16%	–2.50%	–6.66%	19.53%	33.70%	–0.88
2022 Full Year	–35.76%	–18.17%	–17.59%	37.00%	26.29%	–2.61

1. Drawdown protection inconsistent. The strategy showed excellent drawdown control in 2018 (−6pp vs SPY) and 2020 (−14pp vs SPY), but failed in 2022 (+11pp worse).
2. Recovery capture is the weak link. In 2020, it caught the downside but missed the upside. In 2022, it caught the full downside with no recovery at all.
3. Best-case scenario is a short, sharp correction in a growth-friendly trend (e.g., Q4 2018). The strategy is structurally tilted to momentum winners that bounce hard.

Summary

• Top performer: 2018 Q4 – positive return, positive Sortino, strong alpha.
• Worst performer: 2022 – near‑doubled SPY losses, Sortino deeply negative.
• Drawdown management: Good in V‑shaped shocks (2020), poor in prolonged grind (2022).

The strategy is not a universal bear‑market hedge. It excels when the selloff is brief and followed by a sharp rally in the same high‑momentum names (2018), but fails when the bear market is broad, prolonged, and lacks clear trends (2022). The current live portfolio (2026) is benefiting from a strong tech bull trend, which is its natural habitat. If you want a more resilient bear‑market posture, consider adding a systematic drawdown brake (e.g., a trailing stop on NAV) or a separate hedged sleeve (e.g., put credit spreads on defensive names).

I have completed the backtest analysis of your Public Portfolio Challenge across three major historical bear market regimes. This stress test reveals exactly how your LEAPS momentum strategy handles different types of market distress.

Bear Market Performance Comparison

Regime	Portfolio Return	SPY Return	Alpha	Portfolio Max DD	SPY Max DD	Status
2018 Q4 Correction	+5.79%	–13.01%	+18.80%	13.08%	19.47%	Best Performance
2020 COVID Crash	–9.16%	–2.50%	–6.66%	19.53%	33.70%	Best Protection
2022 Inflation Bear	–35.76%	–18.17%	–17.59%	37.00%	26.29%	Worst Performance

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Key Findings & Structural Robustness

1. The "Best Performance": 2018 Q4 Correction

Your portfolio's best performance in a bear/correction environment was the late-2018 sell-off. While SPY dropped 13%, your portfolio actually gained nearly 6%.

• Why it worked: The 126-day momentum ranking likely selected names that were resilient during the initial drop and bounced aggressively in the late-December recovery. The LEAPS duration (150-365 DTE) provided the 'time' necessary to outlast the volatility.

2. The "Best Protection": 2020 COVID Crash

During the extreme 33% SPY crash in March 2020, your portfolio's maximum drawdown was only 19.5%.

• Why it worked: The regime filter (SPY < 0.92 × its 252-day high) likely triggered, slowing down new entries and moving the portfolio to a more defensive posture. However, this same caution caused the portfolio to miss the rapid V-shaped recovery, ending the period with a net loss while the market almost broke even.

3. The Structural Weakness: 2022 Inflation Bear

This was the most challenging regime, with the portfolio losing -35.76%—nearly double the loss of the S&P 500.

• Why it failed: 2022 was a prolonged, grinding bear market with no clear growth trend. The momentum-based LEAPS strategy suffered from heavy theta decay and 'false starts' where momentum would briefly trigger an entry before the market resumed its slide. In a year where growth and tech were the primary targets of selling, a momentum-weighted growth book had nowhere to hide.

Summary Assessment

Your Public Portfolio Challenge is a high-alpha strategy that thrives in trending bull markets (like current 2026 conditions) and short, sharp corrections (like 2018). It offers significant drawdown protection during sudden crashes (like 2020), but it is structurally vulnerable to prolonged, grinding bear markets (like 2022) where momentum signals fail and time decay erodes the LEAPS positions.

To improve robustness, you might consider a 'kill switch' based on long-term trend (e.g., pausing all entries if SPY is below its 200-day SMA) or incorporating a small defensive sleeve of put credit spreads on low-beta names to offset LEAPS decay during flat or down years.

I have completed the backtest analysis of your Public Portfolio Challenge across three major historical bear market regimes. This stress test reveals exactly how your LEAPS momentum strategy handles different types of market distress.

Bear Market Performance Comparison

Regime	Portfolio Return	SPY Return	Alpha	Portfolio Max DD	SPY Max DD	Status
2018 Q4 Correction	+5.79%	–13.01%	+18.80%	13.08%	19.47%	Best Performance
2020 COVID Crash	–9.16%	–2.50%	–6.66%	19.53%	33.70%	Best Protection
2022 Inflation Bear	–35.76%	–18.17%	–17.59%	37.00%	26.29%	Worst Performance

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Key Findings & Structural Robustness

1. The "Best Performance": 2018 Q4 Correction

Your portfolio's best performance in a bear/correction environment was the late-2018 sell-off. While SPY dropped 13%, your portfolio actually gained nearly 6%.

• Why it worked: The 126-day momentum ranking likely selected names that were resilient during the initial drop and bounced aggressively in the late-December recovery. The LEAPS duration (150-365 DTE) provided the 'time' necessary to outlast the volatility.

2. The "Best Protection": 2020 COVID Crash

During the extreme 33% SPY crash in March 2020, your portfolio's maximum drawdown was only 19.5%.

• Why it worked: The regime filter (SPY < 0.92 × its 252-day high) likely triggered, slowing down new entries and moving the portfolio to a more defensive posture. However, this same caution caused the portfolio to miss the rapid V-shaped recovery, ending the period with a net loss while the market almost broke even.

3. The Structural Weakness: 2022 Inflation Bear

This was the most challenging regime, with the portfolio losing -35.76%—nearly double the loss of the S&P 500.

• Why it failed: 2022 was a prolonged, grinding bear market with no clear growth trend. The momentum-based LEAPS strategy suffered from heavy theta decay and 'false starts' where momentum would briefly trigger an entry before the market resumed its slide. In a year where growth and tech were the primary targets of selling, a momentum-weighted growth book had nowhere to hide.

Summary Assessment

Your Public Portfolio Challenge is a high-alpha strategy that thrives in trending bull markets (like current 2026 conditions) and short, sharp corrections (like 2018). It offers significant drawdown protection during sudden crashes (like 2020), but it is structurally vulnerable to prolonged, grinding bear markets (like 2022) where momentum signals fail and time decay erodes the LEAPS positions.

To improve robustness, you might consider a 'kill switch' based on long-term trend (e.g., pausing all entries if SPY is below its 200-day SMA) or incorporating a small defensive sleeve of put credit spreads on low-beta names to offset LEAPS decay during flat or down years.