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Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 8:43 am
by MachineGhost
sophie wrote:The thing that I like the most about the PP is that it reacts to the real market, not the one that pundits think we have. It's quite possible the current increase in bond yields is only a blip. When the yields go up and stay up, then I'll believe that the economic environment is truly changing.
No breakout yet:

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Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 9:05 am
by IDrinkBloodLOL
MachineGhost wrote:Why are you obsessed that those with higher incomes (i.e. job creators and capitalists that do more for the economy than you ever will)
HAHAHAHAHAHA

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 9:51 am
by MachineGhost
IDrinkBloodLOL wrote:
MachineGhost wrote:Why are you obsessed that those with higher incomes (i.e. job creators and capitalists that do more for the economy than you ever will)
HAHAHAHAHAHA
???

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 11:32 am
by dutchtraffic
MachineGhost wrote:
doodle wrote:One strategy that I was surprised that never gained traction here was selling calls and puts as a way to boost returns. It seems like there should be a way devise some sort of algorithm around the rebalancing bands that gives an indication of what level to sell calls and puts. With highly volatile assets that the portfolio holds it seems that a decent return should be able to be generated by this. Am I missing something?
Two things. The rebalancing bands would be so far out of the money there wouldn't be any premium to collect. And the assets are not "highly volatile" -- they're only all about 15% average in the long-term. When you sell insurance all you are doing is taking on the outsized risk of having to payout a claim when there is any kind of Black Swan event. That is not compatible with the PP philosophy.

You could continously short VIX for the essentially the same thing and while you would make double or triple digit returns each year, you would incur high double digit losses during inclemental weather. So in the end selling volatility doesn't offer anything to the PP in terms of risk control, just leverages it up to the wrong direction.
Selling calls with 20-30 delta outperforms buy and hold with lower volatility.

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I made a topic about this but nobody seems to pick up on this.
http://www.gyroscopicinvesting.com/foru ... f=1&t=8723

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:14 pm
by MachineGhost
dutchtraffic wrote:I made a topic about this but nobody seems to pick up on this.
http://www.gyroscopicinvesting.com/foru ... f=1&t=8723
There's just nothing to say. It does nothing for risk control and it breaks the risk parity. It's just a Prosperity enhancement like many other possibilities, except its on the higher risk side of the equation.

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:17 pm
by dutchtraffic
MachineGhost wrote:
dutchtraffic wrote:I made a topic about this but nobody seems to pick up on this.
http://www.gyroscopicinvesting.com/foru ... f=1&t=8723
There's just nothing to say. It does nothing for risk control and it breaks the risk parity. It's just a Prosperity enhancement like many other possibilities, except its on the higher risk side of the equation.
It should lower volatility AND increase returns, we're not talking about writing ATM calls, there is enough upside room left.

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:28 pm
by MachineGhost
dutchtraffic wrote:It should lower volatility AND increase returns, we're not talking about writing ATM calls, there is enough upside room left.
Nonsense. Selling volatility does NOT lower volatility in the long-run. You are making a anti-Black Swan bet. Moreover, a 10% allocation doesn't increase returns: Image
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Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:38 pm
by dutchtraffic
MachineGhost wrote:
dutchtraffic wrote:It should lower volatility AND increase returns, we're not talking about writing ATM calls, there is enough upside room left.
Nonsense. Selling volatility does NOT lower volatility in the long-run. You are making a anti-Black Swan bet. Moreover, a 10% allocation doesn't increase returns:
Your graph is selling ATM calls, not OTM, big difference.

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:40 pm
by dutchtraffic
OTM has better returns than buy and hold.

Image

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:41 pm
by MachineGhost
dutchtraffic wrote:Your graph is selling ATM calls, not OTM, big difference.
My bad. I was also thinking of naked not covered. However, do note that in your chart the maximum drawdown is MUCH, MUCH larger than the S&P 500.

If the risk/reward is better then I say go for it, otherwise you're just getting a little bit extra return for a lot of extra risk. And keep in mind indexes are bullshit and not investable. Real world frictions are significant in options.

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:47 pm
by dutchtraffic
MachineGhost wrote:
dutchtraffic wrote:Your graph is selling ATM calls, not OTM, big difference.
My bad. I was also thinking of naked not covered. However, do note that in your chart the maximum drawdown is MUCH, MUCH larger than the S&P 500.

If the risk/reward is better then I say go for it, otherwise you're just getting a little bit extra return for a lot of extra risk. And keep in mind indexes are bullshit and not investable. Real world frictions are significant in options.
The drawdown can never be higher than buy and hold :)

Re: Trump's Effect on the PP

Posted: Fri Nov 18, 2016 3:49 pm
by MachineGhost
You know, if you had posted this recent study "proving" your assertions in your thread, we could have avoided this squabble:

http://www.cboe.com/micro/buywrite/wils ... -years.pdf

Because this is significant new information.