Had a few questions and idea At some point was this up greater then 30 pct for the year?
Thanks for your interest. I've been dying to discuss this with someone!
For the last 3 years the returns were 3%, 85%, -58%.
Because options obviously expire, it's not like you can just stay the course when the portfolio is down 58% and wait a decade for things to improve like you can do with traditional investments (although even that is challenging for most people). When the options expire, you obviously have to have more cash to put into the portfolio to attempt to make up for the loss.
For these reasons (the large downside volatility and the time pressure that come with options) I don't treat this like a normal investment portfolio where you invest 'X' dollars year one and buy and hold re-investing what this 'X' dollars becomes from year to year.
I usually just put in $5-6K a year. If the actual underlying permanent portfolio (not the options portfolio) has a bad year, then I double or triple the money I put in the following year (depending on how much cash I have available), the idea being that after a bad year one of the three components is more likely to catch fire.
The idea here is to catch a rally in one of the three components, and if you look back at Craig's performance data you can see that it's not uncommon for one of them to have a year where they're up 20-30%. More than makes up for losses in any of the other components during that year. I might start doing it only years in which the underlying PP has had lackluster performance.
I realize this isn't a very rigorous analysis, but it's too hard to backtest this and I do it mostly for fun.
...get out early, Because you always have to worry about time decay.
Time decay really isn't as much of an issue with these as you'd think. I buy these with two years to expiration and sell them with a year left. Most of the time decay of an option occurs in the last 6 months before expiration. Also, I like to hold the positions for over a year for tax purposes (it might be a good idea to actually do this within in an IRA to eliminate the tax issue, but I consider money in retirement funds sacred and don't like to gamble with it).
I think you need to use charting time your entrances, options I don't think fit well into a mechanical strategy.
I just don't believe in this in general. I don't think it works with any investment. Impossible for the average investor to time their investments.
another thing i like to do sometimes is use a synthetic long. Sells some puts. To pay for the calls.
Ideas like this sound good, but in my opinion ultimately just cap the upside of the portfolio.
I think I might implement this Tlt and spy.
This I think actually might be a good idea because SPY and TLT have more of a yin-yang relationship with one another than they do with gold. It would just drive me too nuts to miss out on a big gold rally though, so I keep it. I've thought about switching to a gold mining ETF.
Leveraged etf might be better in high volatility.
I agree. The thing is that they aren't all available as LEAPS. I did manage to set something close up in an educational account once, but it didn't really seem to perform much better or worse than the original, but I was lazy about it and didn't follow it for very long, so who knows.