Search found 1907 matches

by comeinvest
Tue Mar 28, 2023 2:19 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

They still have not created the Micro E-mini S&P MidCap 400 future on IBKR. the person answering ticket was confused between mini and micro.. I created a ticket, and got a response that the micro mid cap has too low volume and OI. I replied that they should add it anyways, as they offer other illiquid futures and we want the micro mid cap. Please everybody who wants it do the same, and perhaps they add it. I haven't checked the bid/ask during regular trading hours, did somebody check? Is it the same as the mini? In my larger trust accounts I'm hedging my large mini mid cap with other futures; but if they add the micro, I could diversify better in my IRA. Frankly I think the mid cap is the best option for leveraged U.S. equities exposur...
by comeinvest
Mon Mar 27, 2023 10:01 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

I tried all of that and paid a bunch of commission and bid ask spreads. So if dealers can easily hedge a long dated synthetic future. The I could just buy a very long dated synthetic then. It will be easier to manage as well. I haven't tried it as I don't know how to price it theoretically yet. I will try that venue Like I said I'm just speculating. But think of it: The counterparties to SPX options also must hedge with some other products, because SPX options are settled to cash. And I think SPX options generally are a bit more liquid and have tighter spreads than /ES options. For sure they have a smaller minimum tick size of 0.05 vs 0.25. I have to think about the pricing. But you could probably go by the index value, plus the risk-free ...
by comeinvest
Mon Mar 27, 2023 8:29 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I see you are using the EMD - E-mini S&P MidCap 400 futures. Hoping that MMC - micro E-mini S&P MidCap 400 futures is available on IBKR soon, it was launched today, Hope it will have enough volume and is popular. Don't see any volume in SMC - E-mini S&P SmallCap 600 futures. Is this correct? Have you bought this? https://www.cmegroup.com/markets/equities/sp/e-mini-sandp-smallcap-600.volume.html No, I'm not sure why they are adding a micro smallcap when there is no volume for the mini smallcap. If you create a product request ticket for the micro midcap, they might add it faster. They still have not created the Micro E-mini S&P MidCap 400 future on IBKR. the person answering ticket was confused between mini and micro.. I cre...
by comeinvest
Mon Mar 27, 2023 5:43 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I see you are using the EMD - E-mini S&P MidCap 400 futures. Hoping that MMC - micro E-mini S&P MidCap 400 futures is available on IBKR soon, it was launched today, Hope it will have enough volume and is popular. Don't see any volume in SMC - E-mini S&P SmallCap 600 futures. Is this correct? Have you bought this? https://www.cmegroup.com/markets/equities/sp/e-mini-sandp-smallcap-600.volume.html No, I'm not sure why they are adding a micro smallcap when there is no volume for the mini smallcap. If you create a product request ticket for the micro midcap, they might add it faster. They still have not created the Micro E-mini S&P MidCap 400 future on IBKR. the person answering ticket was confused between mini and micro.. I cre...
by comeinvest
Mon Mar 27, 2023 4:39 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

If there is a wide bid ask spread on a future then the corresponding related options will also have wide spread. So only the options settling to near future will have smaller spread. Counterparties for our synthetic long future will hedge by selling a future short, if that future has wide spread then that gets tagged on to our synthetic long future. So duration over three months means not easy low spread way for counterparties to hedge as futures past 3 months have wide spread For a 2000 strike synthetic long future roll. The bid ask spread is 40 point wide. The order is accepted around 3 points past the mid. For buying I have to pay 3 points more than the mid of spread towards the ask The mid is very close to theoretical price. First off,...
by comeinvest
Sun Mar 26, 2023 1:48 pm
Forum: Investing - Theory, News & General
Topic: Cost of futures in high rate environment?
Replies: 6
Views: 605

Re: Cost of futures in high rate environment?

whodidntante wrote: Sun Mar 26, 2023 11:45 am It depends on the fund's strategy but managed futures will typically be long-short portfolios, so there is some give and take happening.

Leverage of equities would seem to make sense when the cost of money is high because the same conditions would also tend to depress valuations and increase expected returns. It's leveraging bonds that one should look at more closely right now. The expected return of leveraged long-bonds is currently negative. You might still buy such a thing, if you are aiming for risk parity or if you disagree with my view.
What is your view on bonds based on?
by comeinvest
Sun Mar 26, 2023 12:47 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Perhaps an alternative to complicated leveraged and rebalanced multi-asset strategies would be to put everything into some solid higher beta index, then wait until retirement and chill. No worries about cost of leverage, margin calls, deleveraging, and what not. Mid-cap for example would have resulted in twice the terminal balance of the S&P 500. Could complement this with some small-cap value ETF like AVUV perhaps. https://i.imgur.com/7ZOtINf.png Beta is the enemy :twisted: haha But in seriousness, the sharpe of the large cap and small cap is the same meaning you could leverage the large to get pretty close to the small total return. Mid may just be an anomaly. Would be interesting to test longer. My understanding is that over long ho...
by comeinvest
Sat Mar 25, 2023 7:52 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Commodity futures

I would like to link this post about a book from Antti Ilmanen that is, among other things, about independent sources of returns, somewhat related to mHFEA: https://www.bogleheads.org/forum/viewtopic.php?t=400761 I have to look into what he says about commodity futures, if it could be a potential addition to mHFEA. For those of us who already use treasury, equity index, and SOFR futures, it should be easy to add a permanent rolling allocation to a diversified mix of commodity futures at near zero extra cost (zero expense ratio), if it were to improve risk-adjusted returns. (I'm not talking about trend-following here, which is certainly more labor intensive.) The studies show a long run commodity premium over cash of 3-5%. Diversification is...
by comeinvest
Sat Mar 25, 2023 3:42 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

First of all, I'd like to say a big thank you to skierincolorado, MillenialMillions, Siamond, and others who have contributed so much to this and similar threads. I haven't met you, but I've learned an enormous amount from reading your posts over the past months and years. It's very much appreciated how much time and brainpower you've shared with this community. I'm bought into this strategy but have a few implementation specific questions that I haven't been able to find answers to. 1. Regarding box spreads, what execution date do you target? Do you just look for the one that provides the lowest rate (which is currently Dec '27 according to boxtrades.com). If rates were to drop before then, can you "refinance" by closing the box...
by comeinvest
Sat Mar 25, 2023 1:51 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

impatientInv wrote: Sat Mar 25, 2023 1:33 pm They still have not created the Micro E-mini S&P MidCap 400 future on IBKR. the person answering ticket was confused between mini and micro..
Be persistent and impatient. If we all put in requests, perhaps they have it by June.
by comeinvest
Fri Mar 24, 2023 11:48 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Perhaps an alternative to complicated leveraged and rebalanced multi-asset strategies would be to put everything into some solid higher beta index, then wait until retirement and chill. No worries about cost of leverage, margin calls, deleveraging, and what not.

Mid-cap for example would have resulted in twice the terminal balance of the S&P 500. Could complement this with some small-cap value ETF like AVUV perhaps.

Image
by comeinvest
Fri Mar 24, 2023 11:37 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

[ quote formatted by admin LadyGeek (added colors)] [ quote fixed by admin LadyGeek] I don't understand the logic behind your roll schedule. I also think counterparties can hedge their short index position with any long index position, regardless of expiration. Duration exposure over 3 months is negligible. Also please elaborate what you mean by "MM are accepting orders for more than a 2 to 3 points of theoretical price", thanks! If there is a wide bid ask spread on a future then the corresponding related options will also have wide spread. So only the options settling to near future will have smaller spread. Counterparties for our synthetic long future will hedge by selling a future short, if that future has wide spread then tha...
by comeinvest
Fri Mar 24, 2023 10:33 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

[ quote formatted by admin LadyGeek (added colors)] [ quote fixed by admin LadyGeek] I don't understand the logic behind your roll schedule. I also think counterparties can hedge their short index position with any long index position, regardless of expiration. Duration exposure over 3 months is negligible. Also please elaborate what you mean by "MM are accepting orders for more than a 2 to 3 points of theoretical price", thanks! If there is a wide bid ask spread on a future then the corresponding related options will also have wide spread. So only the options settling to near future will have smaller spread. Counterparties for our synthetic long future will hedge by selling a future short, if that future has wide spread then tha...
by comeinvest
Fri Mar 24, 2023 5:12 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

I don't know what the effective realized spread would be. As you know, in the options market the quoted bid/ask is usually much wider than what you actually get. S: yes quoted spreas is 10 times compared to what actually gets accepted I inteded to roll only the liquid months futures with options so MM can do thier own hedging well and give me a better rate using european style options Synthetic future at May 31 Then to a thursday before June 16 Then to Aug 31 then to a thursday before Sep 16 Like that Cash drag from say $50k is around 900 at 5% (10k + 40k) So each roll should not cost more than 2 points to break even. even lower for lower interest rates. when I tried to roll, MM are accepting orders for more than a 2 to 3 points of theoret...
by comeinvest
Fri Mar 24, 2023 12:31 pm
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

I don't know what the effective realized spread would be. As you know, in the options market the quoted bid/ask is usually much wider than what you actually get. S: yes quoted spreas is 10 times compared to what actually gets accepted I inteded to roll only the liquid months futures with options so MM can do thier own hedging well and give me a better rate using european style options Synthetic future at May 31 Then to a thursday before June 16 Then to Aug 31 then to a thursday before Sep 16 Like that Cash drag from say $50k is around 900 at 5% (10k + 40k) So each roll should not cost more than 2 points to break even. even lower for lower interest rates. when I tried to roll, MM are accepting orders for more than a 2 to 3 points of theoret...
by comeinvest
Fri Mar 24, 2023 12:25 am
Forum: Investing - Theory, News & General
Topic: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]
Replies: 62
Views: 7012

Re: [Interactive Brokers margin account for IRA futures - holding T-Bills not allowed]

Wouldn't the put be considered a naked put therefore disallowed in an IRA? Also, wouldn't the synthetic stock / futures position have its own margin requirement, just like one /ES contract that the synthetic position replaces? Good questions. I am still getting my account setup. For now this is a thought experiment only. Will try and share the update once I have my account ready and funded. Pretty much all brokers support synthetic future. Margin is same as holding a regular future So a synthetic future at say strike 2000 effectively remove all cash drag from both collateral and buffer. The negative is the wide bid ask spread. It is eating away any potential savings If margin is same as regular future, don't you still have cash drag on the...
by comeinvest
Wed Mar 22, 2023 7:01 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I see you are using the EMD - E-mini S&P MidCap 400 futures. Hoping that MMC - micro E-mini S&P MidCap 400 futures is available on IBKR soon, it was launched today, Hope it will have enough volume and is popular. Don't see any volume in SMC - E-mini S&P SmallCap 600 futures. Is this correct? Have you bought this? https://www.cmegroup.com/markets/equities/sp/e-mini-sandp-smallcap-600.volume.html No, I'm not sure why they are adding a micro smallcap when there is no volume for the mini smallcap. If you create a product request ticket for the micro midcap, they might add it faster. The volume on Micro E-mini S&P MidCap 400 futures is quite low. Volume was 40 on Mar 20th and zero of 21st. Is there a problem with buying such a l...
by comeinvest
Mon Mar 20, 2023 11:05 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

impatientInv wrote: Mon Mar 20, 2023 9:01 pm I see you are using the EMD - E-mini S&P MidCap 400 futures. Hoping that MMC - micro E-mini S&P MidCap 400 futures is available on IBKR soon, it was launched today, Hope it will have enough volume and is popular.

Don't see any volume in SMC - E-mini S&P SmallCap 600 futures. Is this correct? Have you bought this?

https://www.cmegroup.com/markets/equiti ... olume.html
No, I'm not sure why they are adding a micro smallcap when there is no volume for the mini smallcap.

If you create a product request ticket for the micro midcap, they might add it faster.
by comeinvest
Mon Mar 20, 2023 1:16 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Why did the June maturity T-bill charts not reflect the Mar 2023 SOFR movement between 03/15 and 03/16 ? The Mar 2023 SOFR expires on 06/21.

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by comeinvest
Sun Mar 19, 2023 2:53 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

There will also be a micro S&P 600 small cap futures with the same launch date. The /SMC is very illiquid, so I'm not sure what is the point of the micro. I haven't looked at the calendar roll bid/ask spreads. Why bother venturing into the more thinly traded indexes, instead of just holding a fund directly? Treasuries and ES futures should be enough leverage to be able to get the more specific exposures in the portfolio unlevered. You can get 4 or 5x leverage in an IRA with 75% of NAV in a SCV fund Only if you were 100% U.S. I also do international at 35% of assets, which when leveraged 1.5x becomes 52.5%. Then factor tilts. Then treasury futures. Then consider it's an IRA and the futures collateral requirement is doubled at IB. If you...
by comeinvest
Sun Mar 19, 2023 6:18 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Trend following

Should I add trend following to my mHFEA? It helped big time in 3 of the 4 major stock and bond market drawdowns since 2000, and was neutral in one. Based on this, it should be a great addition to mHFEA, shouldn't it? My understanding is that the more drawn-out a downturn, the more effective trend following will be at hedging the effect on the portfolio. For the tail risk where it would amplify a sudden large catastrophic event, see the 1987 crash in the chart further down. The realized risk was not large. Charts from the paper: https://www.aqr.com/Insights/Trend-Following https://i.imgur.com/hHWqk1T.png https://i.imgur.com/uC2dnZj.png Benefits to a portfolio from the paper https://www.grahamcapital.com/assets/InsightSeries/Trend-Following%...
by comeinvest
Sat Mar 18, 2023 11:33 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

There will also be a micro S&P 600 small cap futures with the same launch date. The /SMC is very illiquid, so I'm not sure what is the point of the micro. I haven't looked at the calendar roll bid/ask spreads. Why bother venturing into the more thinly traded indexes, instead of just holding a fund directly? Treasuries and ES futures should be enough leverage to be able to get the more specific exposures in the portfolio unlevered. You can get 4 or 5x leverage in an IRA with 75% of NAV in a SCV fund Only if you were 100% U.S. I also do international at 35% of assets, which when leveraged 1.5x becomes 52.5%. Then factor tilts. Then treasury futures. Then consider it's an IRA and the futures collateral requirement is doubled at IB. If you...
by comeinvest
Sat Mar 18, 2023 11:21 pm
Forum: Investing - Theory, News & General
Topic: Explain this arbitrage opportunity based on put/call parity
Replies: 6
Views: 944

Re: Explain this arbitrage opportunity based on put/call parity

sharukh wrote: Sat Mar 18, 2023 6:35 pm
comeinvest wrote: Sat Mar 18, 2023 2:21 pm Are all options in your example settled into the same futures contract? No they are not.
Yes, I made sure of that.

I pick the same thing for different dates based on same underlying future
ES June future

June 16 options are of American style
March 24 options are of European style

Note: there is one more European option for June 16 that settle to September future. I didn't pick it.
I think American exercise style FOPs have a different pricing formula. Different from equity index options which are always suboptimal to exercise early, it can make sense for the owner of the long position to exercise FOPs early. Do some reading.

I think your formula is also somehow missing the risk-free rate.
by comeinvest
Sat Mar 18, 2023 2:21 pm
Forum: Investing - Theory, News & General
Topic: Explain this arbitrage opportunity based on put/call parity
Replies: 6
Views: 944

Re: Explain this arbitrage opportunity based on put/call parity

Are all options in your example settled into the same futures contract? No they are not.
by comeinvest
Sat Mar 18, 2023 12:02 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I'm curious about the risk and return of ITT vs LTT depending on the initial slope of the yield curve. I am comparing 150% equities / 250% ITT vs. 150% equities / 82% LTT, using VFITX for ITT and VUSTX for LTT. The 250% ITT and 82% LTT have equal duration based on current duration exposure (5.3 years for VFITX and 16.2 years for VUSTX). Unfortunately I can't locate historical durations, so the ratio might have been different in 2020 and in 2022. Treasuries upside performance during a macroeconomic crash starting with a positively sloped yield curve: On 02/28/2020, 5-year treasuries yielded 0.89%, and 30-year treasuries yielded 1.65%. The performance in Mar 2020 was ever so slightly in favor of ITT - almost a tie. Treasuries upside performan...
by comeinvest
Sat Mar 18, 2023 10:59 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

There will also be a micro S&P 600 small cap futures with the same launch date. The /SMC is very illiquid, so I'm not sure what is the point of the micro. I haven't looked at the calendar roll bid/ask spreads. Why bother venturing into the more thinly traded indexes, instead of just holding a fund directly? Treasuries and ES futures should be enough leverage to be able to get the more specific exposures in the portfolio unlevered. You can get 4 or 5x leverage in an IRA with 75% of NAV in a SCV fund Yes 75% of NAV in off-index positions and tilts, and 25% in collateral would work in IB IRA's with 2x margin requirement; although it would require relatively frequent monitoring and rebalancing. In trust accounts it's a bit better. Because ...
by comeinvest
Fri Mar 17, 2023 5:20 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

On 03/13 the difference of S&P 400 and S&P 500 implied rate widened again to a relatively typical 0.41%. It looks like I lucked out and got and additional 8.5 bps with my fills, locking in a 0.495% p.a. spread difference with my offsetting equity futures pair for the next quarter, if my math is right. https://i.imgur.com/GY7g7Qj.png https://i.imgur.com/gk64Tla.png Did you see they will have a micro mid cap starting March 20th? I am curious what the implied rate will be. If I understand, emd is 250k per contract which I don't quite have enough for. I'm getting close but I'm also hesitant to switch 250k straight from MES to EMD all at once. There will also be a micro S&P 600 small cap futures with the same launch date. The /SMC i...
by comeinvest
Thu Mar 16, 2023 2:44 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Essentially you hold EM in taxable to capture the higher foreign tax credit. Or use futures in tax advantaged. Buy the developed market msci futures don't have much use because dj600 and nik225 are cheaper. Correct, but DJ600 has a cash collateral drag, unless IB lets us know if any government bonds can be used as futures collateral in lieu of cash. I currently use a mix of DJ600+Nikkei225 and MXEA, until I figure out which is cheaper in the long run. Yeah I suppose the cash drag makes it closer but the rates on mxea are pretty clearly higher if what you posted is correct The implied financing of MXEA and MXEF fluctuates every quarter. You can go to the ICE web site, they have the roll data more than 10 years back. But on average it's high...
by comeinvest
Thu Mar 16, 2023 2:34 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

skierincolorado wrote: Thu Mar 16, 2023 2:22 pm Essentially you hold EM in taxable to capture the higher foreign tax credit. Or use futures in tax advantaged.

Buy the developed market msci futures don't have much use because dj600 and nik225 are cheaper.
Correct, but DJ600 has a cash collateral drag, unless IB lets us know if any government bonds can be used as futures collateral in lieu of cash. I currently use a mix of DJ600+Nikkei225 and MXEA, until I figure out which is cheaper in the long run.
by comeinvest
Thu Mar 16, 2023 2:23 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

skierincolorado wrote: Thu Mar 16, 2023 2:22 pm Essentially you hold EM in taxable to capture the higher foreign tax credit. Or use futures in tax advantaged.
Yes that's part of my strategy, but EM is hard to replicate and I don't want to use ETFs in taxable, that's my principle. I don't want to be locked into a fund once it has unrealized gains, and funds can also be an international tax headache if you ever move abroad. I added some thoughts about my tax strategy to my previous post after you cited it.
by comeinvest
Thu Mar 16, 2023 2:05 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Wow expensive. Why buy msci futures at all? I might buy just 1 mxef for diversification and dollar hedging. What is the alternative? My asset allocation is about world market cap, for maximal diversification benefits. I think the DJ600 futures have less implied financing, but more collateral drag. For emerging markets, you would have a drag of about 0.4% p.a. from dividend withholding if you implement the exposure without futures, that you have to net with the futures implied financing cost. That is before U.S. tax; in taxable accounts the situation is more complicated. Options box spread currently have ca 0.3% financing spread above T-bills. In IRAs you can't use options box spreads; it is not clear if options box spreads result in unrela...
by comeinvest
Thu Mar 16, 2023 1:28 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Wow expensive. Why buy msci futures at all? I might buy just 1 mxef for diversification and dollar hedging. What is the alternative? My asset allocation is about world market cap, for maximal diversification benefits. I think the DJ600 futures have less implied financing, but more collateral drag. For emerging markets, you would have a drag of about 0.4% p.a. from dividend withholding if you implement the exposure without futures, that you have to net with the futures implied financing cost. That is before U.S. tax; in taxable accounts the situation is more complicated. Options box spread currently have ca 0.3% financing spread above T-bills. In IRAs you can't use options box spreads; it is not clear if options box spreads result in unrela...
by comeinvest
Thu Mar 16, 2023 1:06 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Did you see they will have a micro mid cap starting March 20th? I am curious what the implied rate will be. If I understand, emd is 250k per contract which I don't quite have enough for. I'm getting close but I'm also hesitant to switch 250k straight from MES to EMD all at once. Good news. I'm surprised, because the /EMD itself is not that liquid. (The calendar rolls are efficient though, which matters to us investors.) My guess is that the micro midcap will mimic the /EMD accurately and even the bid/ask spread will be similar, because traders and market makers will arbitrage the two. So good news. I am pocketing ca. 0.4% p.a. from my large cap / mid cap index arbitrage pair trade based on the difference in implied rates. I certainly have ...
by comeinvest
Thu Mar 16, 2023 12:36 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

A fantastic correlation regime change occurred around March 6th. Look at that precision in the second chart.

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by comeinvest
Wed Mar 15, 2023 3:50 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Nikkei futures in JPY provide cheap implied financing at about 0.15% above the risk-free rate / government bonds.

I'm not sure what exactly my exposure to volatilities would be if I were to use USD based quanto Nikkei futures, which might become relevant for collateral management when the JPY short-term interest rates rise measurably above zero.

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by comeinvest
Wed Mar 15, 2023 3:33 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

On the ICE site it looks like the MXEF (MME) futures roll cheapened on 03/13; but their reference rates are off; perhaps they take beginning of day values? Rates decreased about 0.2% on average vs the prior day, and 3M SOFR was more like 4.8% on average during the day, making the spread to SOFR on 03/13 about 0.9%. I had a standing limit order while rates were crushing, and paid even more. The MSCI EAFE futures roll was about equally expensive. Not fun.

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by comeinvest
Wed Mar 15, 2023 3:14 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

On 03/13 the difference of S&P 400 and S&P 500 implied rate widened again to a relatively typical 0.41%.
It looks like I lucked out and got and additional 8.5 bps with my fills, locking in a 0.495% p.a. spread difference with my offsetting equity futures pair for the next quarter, if my math is right.

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by comeinvest
Wed Mar 15, 2023 3:01 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I would say the reference interest rates on the CME page are definitely not reliable. The 5.03% 3M SOFR on 03/13 same as on 03/10 doesn't match the SOFR future movement. I think this Mar 2023 SOFR futures contract should closely match the financing period of the CME equity futures expiring in June. Fair enough, they make the SOFR rate field editable; but why don't they put in the correct rate?!

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by comeinvest
Tue Mar 14, 2023 2:43 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

. My logic for 90/10 stock/bonds is basically that since the market is currently down, I don't need as many bonds, Since you posted this 2 year interest rates fell from a high of 5.1% to a brief low of 3.8%. Currently at 4.35%. Huge money to be made. Stocks down. My IB account is up 20%. I don't mean to troll, just to make the point that the market works in unexpected ways. Don't try to predict it. Things could go either way from here. Maybe this is just the beginning of banking sector implosion and rate decreases, maybe things settle down. Again I don't think there is a problem with holding limited or no bonds, but there could be a problem with an attempt to dynamically time them. Not suggesting you add more bonds at this point, unless it...
by comeinvest
Tue Mar 14, 2023 2:27 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I'm mildly confused reconciling the data sources of LIBOR and Term SOFR, can somebody please help? For 03/13, we have SOFR at 4.80 here https://www.traditiondata.com/americas/us-sofr/ https://i.imgur.com/pPtvp2j.png and 4.73 here https://www.theice.com/iba/term-rates https://i.imgur.com/nVbzgOy.png But CME says it was 5.03 https://www.cmegroup.com/trading/equity-index/paceofroll/main.html https://i.imgur.com/tfEosNR.png And ICE has LIBOR at 5.18 https://www.theice.com/pace-of-roll/MSCI-EAFE-(MFS)/20230317-20230616 (although it's 4.87 according to the ICE link in the pic above https://www.theice.com/iba/term-rates) https://i.imgur.com/ESQfH4k.png but it was 4.87 according to here https://www.global-rates.com/en/interest-rates/libor/libor.asp...
by comeinvest
Tue Mar 14, 2023 3:35 am
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 17
Views: 1665

Re: Managed Futures Improve performance

km91 wrote: Mon Mar 13, 2023 4:33 pm
comeinvest wrote: Mon Mar 13, 2023 3:30 am What is the essential difference between the AQR and the Wisdomtree fund?
Biggest difference will be the number of markets they trade. The AQR fund trades futures on liquid markets like rates, currencies, and equity, commodity, and fixed income indexes, but also trades OTC products like swaps and forwards on these markets as well. I think AQR says the fund trades 100+ markets.
I think what I really wanted to ask is, could we have anticipated the divergent performance of the two managed futures fund? Even though they are not market leaders in that area, I'm sure WisdomTree put some thought into this product before they launched it.
by comeinvest
Mon Mar 13, 2023 3:30 am
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 17
Views: 1665

Re: Managed Futures Improve performance

What is the essential difference between the AQR and the Wisdomtree fund?
by comeinvest
Mon Mar 13, 2023 1:52 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

skierincolorado wrote: Fri Mar 10, 2023 8:47 am Wow huge moves in treasuries especially at the short end
From about 11.50 p.m. PDT Sunday evening, not the Friday movements

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by comeinvest
Fri Mar 10, 2023 5:11 pm
Forum: Investing - Theory, News & General
Topic: Why the large gap between muni and treasury yields?
Replies: 4
Views: 836

Re: Why the large gap between muni and treasury yields?

It's a valid question. Municipal bonds seem to be particularly expensive these days on the short end of the yield curve. The muni to treasuries yield ratio is closer to 1 on the long end of the curve. That would mean long munis are a better deal; but there are many factors at play, and there are a number of explanations for the steeper slope of the muni curve, which is a persistent phenomenon; some of them are the embedded optionality and the illiquidity of munis. The muni curve is almost entire positively sloped; the treasury curve is grossly inverted. A possible explanation is that rich individuals in very high tax bracket are particularly risk-averse and push short-term munis higher and their yields lower. This chart is from end of Janua...
by comeinvest
Fri Mar 10, 2023 4:32 pm
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

I think there was an exaggeration up on Mar 9 and an exaggeration down on Mar 10 of the /EMD calendar roll. We'll see on Monday on the CME roll page.

For whatever reason, the futures combination charts only paint the combination order book quotes while the chart is online; they paint the synthetic quotes for the historical portion of the chart. I subscribed to the futures market data bundle because it's free based on my commissions volume.

EDIT: Per CME quarterly roll analyzer, /ES implied financing rate on Friday Mar 10 was 5.39%, and /EMD was at 5.04% (almost identical to 3-months SOFR). However, there was a deeper drawdown of the /EMD roll at times during the day.

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by comeinvest
Fri Mar 10, 2023 1:50 am
Forum: Investing - Theory, News & General
Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Replies: 2407
Views: 246931

Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

impatientInv wrote: Thu Mar 09, 2023 6:26 pm Yes you are right. I did not match the durations with PSLDX. Please make changes and repost if you can.
I added the statistics and the chart with the correct comparison to my post above.
by comeinvest
Fri Mar 10, 2023 1:22 am
Forum: Investing - Theory, News & General
Topic: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]
Replies: 1852
Views: 302061

Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Not sure what you mean by "2x HFEA" There will however be leverage decay in the long run, as they will have to deleverage during drawdowns I mean the equivalent of 50% SSO/50% UBT. There will be zero leverage or volatility decay on the bonds as the fund holds bonds straight up at 1x and then uses those bonds as collateral to purchase derivates on equities. The only volatility "decay" on the equities will be when equities go down and the fund sells bonds to buy more equities. When both assets go down, the fund will presumably deleverage to some extent, right? Which means volatility decay eventually. Otherwise new investors would be buying into a much higher leveraged fund than what it says in the prospectus and on the we...
by comeinvest
Fri Mar 10, 2023 1:07 am
Forum: Investing - Theory, News & General
Topic: Buffett's 2022 Berkshire Hathaway Shareholder Letter
Replies: 76
Views: 10925

Re: Buffett's 2022 Berkshire Hathaway Shareholder Letter

But also note, it is likely Buffet is avoiding paying dividends and prefers buybacks to benefit his own tax situation. He plans to leave his wealth to a non-profit organization, most likely a 501(c)(3) private foundation. The restrictions on private foundations make it difficult to maintain control over a large corporation, so he would pretty quickly have to start selling shares if he donated them to a foundation while alive. If he had started that at age 80, he would already have less direct control by now. If he paid dividends, he would pay taxes and would have limitations on his ability to donate the dividends due to the 50/60 limitations and (for many years) the Pease limitations. So, to advance his own interests, he is holding the sto...
by comeinvest
Fri Mar 10, 2023 12:53 am
Forum: Investing - Theory, News & General
Topic: Buffett's 2022 Berkshire Hathaway Shareholder Letter
Replies: 76
Views: 10925

Re: Buffett's investment letter 2022 - leverage

There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice. https://www.berkshirehathaway.com/letters/2022ltr.pdf There's a lot of very clever strategies involving leverage out there. They can all wind up with 0 as an outcome. i read that too but it's important to note that was one of Charlie's quips, not Warren's. Also there's an article that says from 1976-2011: Once he has selected these cheap, quality, low-beta stocks, Buffett magnifies their returns with the judicious use of leverage, which he finances with below-market-cost capital from a balance sheet that includes a sizable float from Berkshire...