PP Inspired Leveraged Portfolios

A place to talk about speculative investing ideas for the optional Variable Portfolio

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Kbg
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 28, 2020 12:03 am

Still up 6%, that is all.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Mar 09, 2020 11:40 am

Well today has been fun and insane. Who woulda thought, TMF +23% overnight? Spent a good chunk of the morning rebalancing out of long bonds.
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Re: PP Inspired Leveraged Portfolios

Post by ILoveMoney » Thu Mar 12, 2020 9:38 am

Thanks for the updates!
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Re: PP Inspired Leveraged Portfolios

Post by mdwilson1991 » Thu Mar 12, 2020 10:16 am

Kbg,

I'm confused by the many variations discussed over multiple years / threads.

What is your current allocation for a leveraged PP - and is it a fixed "non tactical" type?
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Re: PP Inspired Leveraged Portfolios

Post by blackomen » Thu Mar 12, 2020 2:13 pm

Equal-weight SSO, UGL, and UBT. Since you're foregoing cash, it's technically a 2.66x leveraged PP.

I used this from 2014 until like late last month after the VIX jumped over 30 and switched back to the standard PP (SPY, GLD, TLT, and SHY.) I've endured further losses but it would have been much worse had I been leveraged,not to mention it'll keep me up at night. But hey, I made almost 40% last year with these levered ETFs so I'm not complaining. According to ETF Replay, such a levered portfolio exhibits similar volatility as holding 100% Spy.

FYI, levered ETFs exhibit decay over time so you'll want to rebalance this one frequently, maybe at least a couple of times a year. At least when you rebalance, you'll be buying low and thus actually using the ETF decay to your advantage as well.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Mar 12, 2020 5:25 pm

My personal mix is:

60 unleveraged bonds, 20 TQQQ, 10 TMF, 10 UGLD

Kinda like PP vs. a GB.

Personally I'd dial it/the mix into whatever you feel comfortable with and stick with it.
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Re: PP Inspired Leveraged Portfolios

Post by var » Mon Mar 16, 2020 9:18 pm

Great stuff..

I sort of legged in to Levaraged PP.

I bought some UGLD and TMF. I didn't buy any 3X SPY because i thought the market was too high and weighted for a pullback.

So far so good.

I have been buy 3x SPY ETF as the market keeps dropping.


What are people using as rebalance bands for 3x PP? suggestions
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Re: PP Inspired Leveraged Portfolios

Post by var » Mon Mar 16, 2020 9:20 pm

I also noticed an tracking error with TLT and UBT today.

3.16.20
TLT +6.48%
UBT 9.94%
TMF +16.76
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Tue Mar 24, 2020 10:38 pm

I could not be more pleased at how this has performed.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Jun 05, 2020 10:28 pm

My personal mix is:

60 unleveraged bonds, 20 TQQQ, 10 TMF, 10 UGLD

Through the close on 6/5/20:

By the book: 10.46%

Personal version that includes a little market timing on my part: 13.30%

Basically I didn't get why LTTs would spike as high and as hard as they did...made no rational sense. As soon as I saw how much they popped I rebalanced out of TMF very near the top on 3/9 into the other assets. Then I rebalanced into TQQQ on 4/3 and rebalanced out of TQQQ on 4/23 and again yesterday.

Of note, in one account I have been experimenting with MNQ and MGC micro futures in place of TQQQ and UGLD. I do not recommend it for those who are not really familiar with both futures and how your brokerage handles margin. It has been a bit tricky and definitely more work. Doable for those who know what they are doing, but to repeat, definitely more work calculating equivalent holdings required. Basically you need to understand your broker's margin and liquidation policies very well and you need a spreadsheet to calculate mixed positions for the same asset. For example one could simulate TQQQ with MNQ and TQQQ, QLD or QQQ. Each of the latter will impact overall account margin and required cash balances.

The jury is out for me on whether I will stick with it or not. I'm going to do it for the rest of this year and review at the end of the year.
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Mon Jun 22, 2020 8:01 pm

Houston, we have a problem. UGLD is being de-listed, see article here:

https://www.prnewswire.com/news-release ... 80971.html

This is a real bummer. I've owned UGLD since 2014 and made good money with it. I'm going to sell it and pay tax, then replace it with UGL (2x gold).

To bring ya'll up to speed, I've been running my own version of a leveraged PP, which consists of: 45% UPRO, 35% TMF, 20% UGLD, rebalanced yearly.

Now, I'm thinking my new version will be: 40% UPRO, 30% TMF, 30% UGL, rebalanced yearly. Its very similar performance, here's the comparison between the old and new versions:

https://www.portfoliovisualizer.com/bac ... tion6_2=30
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Jun 22, 2020 8:35 pm

Yeah we do. Thanks for posting I was just coming to post this.

In addition to UGL, I think DGP is worth a look. They both have their pros and cons.

DGP, cheaper, clearly better performing, no K-1...big downside it's an ETN, but so was UGLD. Personally, if one could digest UGLD then I think DGP is the better choice. In a taxable, probably need to dig deep into the tax implications. I can't remember if UGL would be a 1256. If so, then advantage probably to UGL in a taxable account.

While it is definitely more work, in one account I switched to MGC to get the hang of running the stock and gold components with futures vs. ETFs. I will likely switch the other account that I can do this to gold futures (MGC).
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Jul 16, 2020 10:06 pm

A quick update...thus far another "I need to pinch myself" year...accounts doing this are all 25%+ on the year.

Haven't decided yet, but I think I will probably ditch the futures. Too much of a hassle in a tax advantaged account. Another option may be to just keep the gold contract as the Nasdaq 100 ETFs are doing just fine and very efficient to trade.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Aug 06, 2020 2:16 pm

North of 30% now, cash/STT's dropped below 50% in several accounts so re topped to my allocation of 55%
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Re: PP Inspired Leveraged Portfolios

Post by var » Fri Aug 07, 2020 8:04 pm

Good heads up on ULGD... i sold it when it was in the OTC.

I feel leveraged ETF to be safer then ETN.

UGL might not be a perfect solution. but a little NUGT with it might add to the leverage.


Otherwise, my Variable PP is doing pretty well. On the bond side. the 3X fund and 2X seem to have considerable tracking errors. yu fo

Prob best to lighten up if you feel an impending bear market in the future.
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Re: PP Inspired Leveraged Portfolios

Post by var » Wed Aug 19, 2020 12:02 pm

Ubt imploded yesterday. -47 pct
C6EAFCB5-368A-459D-8E52-C70051354C4E.png
C6EAFCB5-368A-459D-8E52-C70051354C4E.png (551.96 KiB) Viewed 29115 times

Any news why?

Proshares usually good with other products.

One needs to be careful
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Wed Aug 19, 2020 6:52 pm

Var - do your own UBT? Can you confirm it imploded? I don't see any evidence. According to Morningstar, as of 8/18/20, its up 41% YTD: https://www.morningstar.com/etfs/arcx/ubt/performance
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Re: PP Inspired Leveraged Portfolios

Post by var » Thu Aug 20, 2020 10:40 pm

Maybe charting was off that day.

No I don’t own it. It’s trading volume way to low.

I been watching it does have a lot of tracking errors.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 21, 2020 10:05 am

I tried to swap UGL for DGP, but my company retirement plan has a restriction on it...go figure.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Aug 31, 2020 11:50 pm

The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Sep 24, 2020 11:50 pm

It has been a while since an official update...so let's do one.

My personal mix has changed this year:

Start: 60% VGSH, 20 TQQQ, 10 TMF, 10 UGLD

Then: 55% VGSH, 20 TQQQ, 10 TMF, 15 DGP (adjustment for the demise of UGLD)

Now: VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

I will ignore the "Start" mix as it really isn't tradable anymore for performance.

Through the close on 9/24/20:

Then Portfolio: 23.40%, MDD - 18.33%

Now Portfolio: 21.75%, MDD - 13.64%

Live Portfolio: 25.71%. MDD ??

As noted previously the live portfolio includes some timing on my part...strictly done however within the overall construct of the portfolio. What I'm doing is timing rebalances which with leveraged ETFs is worth doing more contrary to the standard advice for unleveraged assets where less is often better. Risk control is key when using leverage and if you have an ok timing system then it can add value which (I think) I've demo'ed for most years I've posted.

I bailed on the futures version of this which I experimented with in an IB IRA. Keeping track of margin and required cash balances was just too much pain in the butt and there are settlement/trading restrictions which, strangely enough, is not the case with leveraged ETFs. This was even worse I thought. So went back to ETFs which is a bit of a bummer cost wise.

The board has discussed LTTs quite a bit lately and the "Then" and "Now" allocation mixes reflect my decision. I would not be the least bit surprised to see me bail sometime down the road on UST to further shorten duration. To compensate for pulling out some diversification you can see I've added VIXY (actually VXX) which provides pretty much guaranteed negative correlation when one needs it. And the recent performance stats are beautiful for illustrating the pros/cons of using VIXY. Rounding off (using above performance #s) 1.75% less return for 4.75% less max drawdown. However, let's break it down a little bit more to illustrate what happens under the hood. The numbers just below are the two respective portfolios time segmented by market type.

2/19 - 3/23 Then -8.51% Now +.94% (big down market)
3/23 - 9/2 Then +89.91% Now +99.89% (big up market)
9/2 - 9/24 Then -8.57% Now - 9.26% (down market - size TBD)

Big down market...actually eked out a small profit. VIXY up ~654% (1K = 5.95K), TQQQ down 73% (5K = 1.36K)..If this stuff is of interest to you, this math is well worth pondering. However lest I oversell this thing I said you should consider carefully, our hedge that did so wonderful in Feb-March lost 7% in this latest decline which is typical. In the bull market it lost 40%ish of it's value. Just ain't no such thing as a free lunch folks. (OBTW...both allocations had way better performance and way less risk than a 100% QQQ portfolio.)

Well, I think this was one of my better updates in awhile. Most of the key principles and examples of running a leveraged portfolio I wrote about extensively a couple of years ago. This one adds the element of long VIX futures and how they behave. Hope my long time readers enjoyed it.
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Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Fri Sep 25, 2020 8:49 am

Kbg wrote:
Thu Sep 24, 2020 11:50 pm
Hope my long time readers enjoyed it.
Thanks Kbg! I'll sit down with this over the weekend and go over it with a fine toothed comb. I always learn a ton when I pick apart the machinery behind your allocations. I'm looking forward to it.

Mark
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Sep 25, 2020 10:12 am

Mark Leavy wrote:
Fri Sep 25, 2020 8:49 am
Kbg wrote:
Thu Sep 24, 2020 11:50 pm
Hope my long time readers enjoyed it.
Thanks Kbg! I'll sit down with this over the weekend and go over it with a fine toothed comb. I always learn a ton when I pick apart the machinery behind your allocations. I'm looking forward to it.

Mark
Tip...spend time looking at basically a ratio of VIXY/VXX to your leveraged stock component. Also, UVXY just has way too much contango to overcome. I was hoping to use less UVXY but it doesn’t seem to work out well. And as noted, UST is probably my biggest “should I use this” question about the allocation. Wish I could predict interest rates. :-)
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Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Sun Sep 27, 2020 12:57 pm

Thanks again, Kbg. I spent all morning on this and I'm pretty comfortable with your reasoning. You really have a good mind.

Now, I just need another week or so of pondering and what/ifs to game how these variable would fit in with my life. I like about 40% of my assets in physical gold and about 5 years of living expenses in cash. The rest should be making me money - over the very long term.

I'm going to play around for a bit and run every scenario I can think of. Much like Vinny, (who I suspect has not yet taken the PP jump :) I'm a slow moving guy.

Whenever I read well thought out plans or strategies, I always wonder what the author really knows, and how much was elided for the purpose of public consumption.

Mark
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Re: PP Inspired Leveraged Portfolios

Post by vnatale » Sun Sep 27, 2020 1:09 pm

Mark Leavy wrote:
Sun Sep 27, 2020 12:57 pm
Thanks again, Kbg. I spent all morning on this and I'm pretty comfortable with your reasoning. You really have a good mind.

Now, I just need another week or so of pondering and what/ifs to game how these variable would fit in with my life. I like about 40% of my assets in physical gold and about 5 years of living expenses in cash. The rest should be making me money - over the very long term.

I'm going to play around for a bit and run every scenario I can think of. Much like Vinny, (who I suspect has not yet taken the PP jump :) I'm a slow moving guy.

Whenever I read well thought out plans or strategies, I always wonder what the author really knows, and how much was elided for the purpose of public consumption.

Mark
100% correct assumption on your part! Good memory!

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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