HEDGEFUNDIE's excellent adventure Part II: The next journey

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RocketShipTech
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RocketShipTech »

BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
BayStater
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BayStater »

^ Yes, thank you.
Jags4186
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Jags4186 »

BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Yes. A margin account has the risk of a margin call that could wipe you out instantly.
markcloutier1212
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by markcloutier1212 »

With hundreds of pages its kind of hard to tell -- but is there any new consensus on the ideal rebalancing schedule for Hedgefundie's 45/55 TMF/UPRO approach? Is it 10% bands, quarterly, or something else?
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firebirdparts
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

markcloutier1212 wrote: Mon Jul 13, 2020 11:05 am With hundreds of pages its kind of hard to tell -- but is there any new consensus on the ideal rebalancing schedule for Hedgefundie's 45/55 TMF/UPRO approach? Is it 10% bands, quarterly, or something else?
That is a critically important question, and I don't think there's a consensus. Having just gone through the recent unpleaseantness, it does give you some data to experiment on. For instance, if you rebalanced quarterly on the calandar, you'd have rebalanced on January 1, April 1, and June 1. This would have been really incredibly lucky. The key word here is to recognize luck. That was luck.

When it dumps, I have a hard time waiting, and I rebalanced on the way down. That's bad.
A fool and your money are soon partners
taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

RocketShipTech wrote: Mon Jul 13, 2020 8:41 am
BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

nigel_ht wrote: Fri Jul 10, 2020 1:17 pm Is there a good synopsis post of the current implementation or is it the same as the OP? I (think) I see some variations within the thread.
@nigel_ht

Nigel, that is a good idea.

What if there was a concise guide that had all the information inside of it?

I envision it laid out:
- The fundamentals behind the strategy
- How exactly to implement the strategy step-by-step
- Top concerns addressed
- The academic literature behind it
- Who the strategy is ideal for and who shouldn’t implement it
- Taxable or Tax Sheltered Account
- Optimizing when to rebalance
- Eureka! When to get out successfully
- Reasons why the original portfolio changed
- Discover the reasons why this wasn’t done before

What are your thoughts if there was a concise guide that packed all the highlights, key tenants, and graphs into an easy to read manner?

PS - Did I miss any other *big* questions that you'd like to add? Feel free to DM me, too.
SVT
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by SVT »

MetaPhysician wrote: Mon Jul 13, 2020 2:37 pm
nigel_ht wrote: Fri Jul 10, 2020 1:17 pm Is there a good synopsis post of the current implementation or is it the same as the OP? I (think) I see some variations within the thread.
@nigel_ht

Nigel, that is a good idea.

What if there was a concise guide that had all the information inside of it?

I envision it laid out:
- The fundamentals behind the strategy
- How exactly to implement the strategy step-by-step
- Top concerns addressed
- The academic literature behind it
- Who the strategy is ideal for and who shouldn’t implement it
- Taxable or Tax Sheltered Account
- Optimizing when to rebalance
- Eureka! When to get out successfully
- Reasons why the original portfolio changed
- Discover the reasons why this wasn’t done before

What are your thoughts if there was a concise guide that packed all the highlights, key tenants, and graphs into an easy to read manner?

PS - Did I miss any other *big* questions that you'd like to add? Feel free to DM me, too.
I think a lot of that is addressed in the OP from both threads.
RocketShipTech
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RocketShipTech »

taojaxx wrote: Mon Jul 13, 2020 2:21 pm
RocketShipTech wrote: Mon Jul 13, 2020 8:41 am
BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

SVT wrote: Mon Jul 13, 2020 2:39 pm
MetaPhysician wrote: Mon Jul 13, 2020 2:37 pm
nigel_ht wrote: Fri Jul 10, 2020 1:17 pm Is there a good synopsis post of the current implementation or is it the same as the OP? I (think) I see some variations within the thread.
@nigel_ht

Nigel, that is a good idea.

What if there was a concise guide that had all the information inside of it?

I envision it laid out:
- The fundamentals behind the strategy
- How exactly to implement the strategy step-by-step
- Top concerns addressed
- The academic literature behind it
- Who the strategy is ideal for and who shouldn’t implement it
- Taxable or Tax Sheltered Account
- Optimizing when to rebalance
- Eureka! When to get out successfully
- Reasons why the original portfolio changed
- Discover the reasons why this wasn’t done before

What are your thoughts if there was a concise guide that packed all the highlights, key tenants, and graphs into an easy to read manner?

PS - Did I miss any other *big* questions that you'd like to add? Feel free to DM me, too.
I think a lot of that is addressed in the OP from both threads.
No doubt the information is in there. However, I doubt it is easy to find now since we have 2 threads with > 200 + pages.
SVT
Posts: 359
Joined: Mon Oct 13, 2008 8:56 am

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by SVT »

MetaPhysician wrote: Mon Jul 13, 2020 4:07 pm
SVT wrote: Mon Jul 13, 2020 2:39 pm
MetaPhysician wrote: Mon Jul 13, 2020 2:37 pm
nigel_ht wrote: Fri Jul 10, 2020 1:17 pm Is there a good synopsis post of the current implementation or is it the same as the OP? I (think) I see some variations within the thread.
@nigel_ht

Nigel, that is a good idea.

What if there was a concise guide that had all the information inside of it?

I envision it laid out:
- The fundamentals behind the strategy
- How exactly to implement the strategy step-by-step
- Top concerns addressed
- The academic literature behind it
- Who the strategy is ideal for and who shouldn’t implement it
- Taxable or Tax Sheltered Account
- Optimizing when to rebalance
- Eureka! When to get out successfully
- Reasons why the original portfolio changed
- Discover the reasons why this wasn’t done before

What are your thoughts if there was a concise guide that packed all the highlights, key tenants, and graphs into an easy to read manner?

PS - Did I miss any other *big* questions that you'd like to add? Feel free to DM me, too.
I think a lot of that is addressed in the OP from both threads.
No doubt the information is in there. However, I doubt it is easy to find now since we have 2 threads with > 200 + pages.
I was saying a lot of it is addressed in the original post in both threads. Have you seen/read the original post from Part 1? It's been a while for me but I think a lot of the above is addressed in that first post in Part 1.

After reading them, post back what hasn't been addressed in both original posts from hedgefundie.
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

SVT wrote: Mon Jul 13, 2020 4:39 pm
MetaPhysician wrote: Mon Jul 13, 2020 4:07 pm
SVT wrote: Mon Jul 13, 2020 2:39 pm
MetaPhysician wrote: Mon Jul 13, 2020 2:37 pm
nigel_ht wrote: Fri Jul 10, 2020 1:17 pm Is there a good synopsis post of the current implementation or is it the same as the OP? I (think) I see some variations within the thread.
@nigel_ht

Nigel, that is a good idea.

What if there was a concise guide that had all the information inside of it?

I envision it laid out:
- The fundamentals behind the strategy
- How exactly to implement the strategy step-by-step
- Top concerns addressed
- The academic literature behind it
- Who the strategy is ideal for and who shouldn’t implement it
- Taxable or Tax Sheltered Account
- Optimizing when to rebalance
- Eureka! When to get out successfully
- Reasons why the original portfolio changed
- Discover the reasons why this wasn’t done before

What are your thoughts if there was a concise guide that packed all the highlights, key tenants, and graphs into an easy to read manner?

PS - Did I miss any other *big* questions that you'd like to add? Feel free to DM me, too.
I think a lot of that is addressed in the OP from both threads.
No doubt the information is in there. However, I doubt it is easy to find now since we have 2 threads with > 200 + pages.
I was saying a lot of it is addressed in the original post in both threads. Have you seen/read the original post from Part 1? It's been a while for me but I think a lot of the above is addressed in that first post in Part 1.

After reading them, post back what hasn't been addressed in both original posts from hedgefundie.
Yes, I have read them. They fail to include the rich insight from other posters, though.

I could be wrong, oftentimes I am, however I feel there are multiple questions that have been posted in threads that have been previously answered. Perhaps having them in a clear easy to read guide (instead of searching and scrolling) might be helpful to some. Sounds like you wouldn't find it helpful, though, which is absolutely fine.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

MetaPhysician wrote: Mon Jul 13, 2020 5:18 pm Yes, I have read them. They fail to include the rich insight from other posters, though.

I could be wrong, oftentimes I am, however I feel there are multiple questions that have been posted in threads that have been previously answered. Perhaps having them in a clear easy to read guide (instead of searching and scrolling) might be helpful to some. Sounds like you wouldn't find it helpful, though, which is absolutely fine.
That's a tough request, because different people will outline it with their own take and perspective. I went through both threads over a few days to catch up, I think it provides a good insight and is worth the effort.

I would say that the journey is often important, not just reading a summary sheet, doesn't have the same impact.
taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

RocketShipTech wrote: Mon Jul 13, 2020 2:56 pm
taojaxx wrote: Mon Jul 13, 2020 2:21 pm
RocketShipTech wrote: Mon Jul 13, 2020 8:41 am
BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

randyharris wrote: Mon Jul 13, 2020 5:29 pm
MetaPhysician wrote: Mon Jul 13, 2020 5:18 pm Yes, I have read them. They fail to include the rich insight from other posters, though.

I could be wrong, oftentimes I am, however I feel there are multiple questions that have been posted in threads that have been previously answered. Perhaps having them in a clear easy to read guide (instead of searching and scrolling) might be helpful to some. Sounds like you wouldn't find it helpful, though, which is absolutely fine.
That's a tough request, because different people will outline it with their own take and perspective. I went through both threads over a few days to catch up, I think it provides a good insight and is worth the effort.

I would say that the journey is often important, not just reading a summary sheet, doesn't have the same impact.
That's a good point. There is some suspense in wondering what will come next.
RocketShipTech
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Joined: Sat Jun 13, 2020 10:08 pm

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RocketShipTech »

taojaxx wrote: Mon Jul 13, 2020 5:31 pm
RocketShipTech wrote: Mon Jul 13, 2020 2:56 pm
taojaxx wrote: Mon Jul 13, 2020 2:21 pm
RocketShipTech wrote: Mon Jul 13, 2020 8:41 am
BayStater wrote: Mon Jul 13, 2020 8:39 am

I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

MetaPhysician wrote: Mon Jul 13, 2020 5:57 pm That's a good point. There is some suspense in wondering what will come next.
btw - keeping in mind that the past performance does not predict future performance...

Image
taojaxx
Posts: 111
Joined: Wed Jul 18, 2012 8:25 pm

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm
taojaxx wrote: Mon Jul 13, 2020 5:31 pm
RocketShipTech wrote: Mon Jul 13, 2020 2:56 pm
taojaxx wrote: Mon Jul 13, 2020 2:21 pm
RocketShipTech wrote: Mon Jul 13, 2020 8:41 am

Trading volatility decay for callable debt. Not a good trade IMO
"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
RocketShipTech
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RocketShipTech »

taojaxx wrote: Mon Jul 13, 2020 7:22 pm
RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm
taojaxx wrote: Mon Jul 13, 2020 5:31 pm
RocketShipTech wrote: Mon Jul 13, 2020 2:56 pm
taojaxx wrote: Mon Jul 13, 2020 2:21 pm

"On March 15, 2020, ProShares announced that it plans to close and liquidate the following funds, traded on the exchanges noted.
UltraPro Communication Services Select Sector UltraPro Financial Select Sector UltraPro Nasdaq Biotechnology Sector UltraPro Short Communication Services Select Sector UltraPro Short Financial Select Sector UCOM FINU UBIO SCOM FINZ"
See also UGLD and USLV from Credit Suisse.

If that's not callable, I don't know what is.

As to being wiped out by a margin call, that would be the circumstances where UPRO/TMF would be wiped out too. Difference with VTI/EDV is you can modulate your leverage and exposure more precisely than with 3X LETF. That's a 2 edged sword and the only drawback I see as it opens up behavioral issues : fiddling with the exposure.

Finally, you're not trading only vol decay, but most importantly management fees, hence the significantly higher CAGR.
Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
Hey buddy I don’t know who you think you are but you’re the one who needs to re-educate yourself on margin accounts.

$100k equity with $300k market exposure gives you 3x leverage and 33% equity.
Most brokers require at least 25% equity.
If your VOO/TLT combo drops 15% in one day, your new market exposure is $255k, and your equity is $55k, meaning you now have only 21% equity. Margin call time. You need to come up with $9k to bring your equity up to 25%.

This would never happen with LETFs. Oh, and most brokers require 50% margin on positions held overnight.
perfectuncertainty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by perfectuncertainty »

randyharris wrote: Mon Jul 13, 2020 7:18 pm
MetaPhysician wrote: Mon Jul 13, 2020 5:57 pm That's a good point. There is some suspense in wondering what will come next.
btw - keeping in mind that the past performance does not predict future performance...

Image
Cool chart. Would you mind sharing where you got it from? Thanks
taojaxx
Posts: 111
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

RocketShipTech wrote: Mon Jul 13, 2020 7:58 pm
taojaxx wrote: Mon Jul 13, 2020 7:22 pm
RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm
taojaxx wrote: Mon Jul 13, 2020 5:31 pm
RocketShipTech wrote: Mon Jul 13, 2020 2:56 pm

Liquidation and margin calls are two entirely different things.

Liquidation of an ETF yields you the proceeds of whatever the ETF holds. You cannot lose more than what you put in.

A margin call means you have to put in more money than what you originally put in
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
Hey buddy I don’t know who you think you are but you’re the one who needs to re-educate yourself on margin accounts.

$100k equity with $300k market exposure gives you 3x leverage and 33% equity.
Most brokers require at least 25% equity.
If your VOO/TLT combo drops 15% in one day, your new market exposure is $255k, and your equity is $55k, meaning you now have only 21% equity. Margin call time. You need to come up with $9k to bring your equity up to 25%.

This would never happen with LETFs. Oh, and most brokers require 50% margin on positions held overnight.
"Buddy",I'm sure you think quite highly of who you think you are.You indeed sound like you have a lot of respect for yourself.
Who told you the adventure was 100% of my account? The broker looks at margin vs. total account value.
Plus, I can modulate my leverage on rough days just as well as the UPRO guys do, without paying the management fee.
RocketShipTech
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RocketShipTech »

taojaxx wrote: Mon Jul 13, 2020 9:16 pm
RocketShipTech wrote: Mon Jul 13, 2020 7:58 pm
taojaxx wrote: Mon Jul 13, 2020 7:22 pm
RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm
taojaxx wrote: Mon Jul 13, 2020 5:31 pm
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
Hey buddy I don’t know who you think you are but you’re the one who needs to re-educate yourself on margin accounts.

$100k equity with $300k market exposure gives you 3x leverage and 33% equity.
Most brokers require at least 25% equity.
If your VOO/TLT combo drops 15% in one day, your new market exposure is $255k, and your equity is $55k, meaning you now have only 21% equity. Margin call time. You need to come up with $9k to bring your equity up to 25%.

This would never happen with LETFs. Oh, and most brokers require 50% margin on positions held overnight.
"Buddy",I'm sure you think quite highly of who you think you are.You indeed sound like you have a lot of respect for yourself.
Who told you the adventure was 100% of my account? The broker looks at margin vs. total account value.
Plus, I can modulate my leverage on rough days just as well as the UPRO guys do, without paying the management fee.
If the strategy works it will become the vast majority of your account, that is the whole point.

Feel free to report back on your progress.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

glenmalan wrote: Mon Jul 13, 2020 9:09 pm Cool chart. Would you mind sharing where you got it from? Thanks
I have a “master spreadsheet” that I track all the strategies I invest in, and some that I just track, I put out that chart from my spreadsheet, aka “Investment Strategies”.
perfectuncertainty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by perfectuncertainty »

randyharris wrote: Mon Jul 13, 2020 7:18 pm
MetaPhysician wrote: Mon Jul 13, 2020 5:57 pm That's a good point. There is some suspense in wondering what will come next.
btw - keeping in mind that the past performance does not predict future performance...

Image
For the Adaptive model, how many timing periods are you using? I use 1.
Volatility Trading Days? I use 21
Allocation weight method? I use inverse volatility
Trading Frequency? I use monthly
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

taojaxx wrote: Mon Jul 13, 2020 9:16 pm
RocketShipTech wrote: Mon Jul 13, 2020 7:58 pm
taojaxx wrote: Mon Jul 13, 2020 7:22 pm
RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm
taojaxx wrote: Mon Jul 13, 2020 5:31 pm
A margin call IS EXACTLY a liquidation of your position. Same as liquidating the LETF.
For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position. For this to happen, your leverage has to be greater than 3. As abundantly discussed upthread, stocks cannot move beyond 33% down due to circuit breakers. Bonds moving over 33% down in a day is so remote that no circuit breakers have been instituted.
Provided you limit your leverage to 3 (which is the name of the game), no margin call will ever trigger requirements for extra funds in this strategy.
Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
Hey buddy I don’t know who you think you are but you’re the one who needs to re-educate yourself on margin accounts.

$100k equity with $300k market exposure gives you 3x leverage and 33% equity.
Most brokers require at least 25% equity.
If your VOO/TLT combo drops 15% in one day, your new market exposure is $255k, and your equity is $55k, meaning you now have only 21% equity. Margin call time. You need to come up with $9k to bring your equity up to 25%.

This would never happen with LETFs. Oh, and most brokers require 50% margin on positions held overnight.
"Buddy",I'm sure you think quite highly of who you think you are.You indeed sound like you have a lot of respect for yourself.
Who told you the adventure was 100% of my account? The broker looks at margin vs. total account value.
Plus, I can modulate my leverage on rough days just as well as the UPRO guys do, without paying the management fee.
Please take the time to read through the thread. I tried this exact strategy via portfolio margin at interactive brokers and got burned in March during the drawdown. Margin call. Forced to deleverage at the worst possible time. IB will decide, on a whim, to increase your margin requirements when things get scary if you use portfolio margin. I still use margin but only a very little, giving myself a VERY large cushion should the market drop. LETFs are a fantastic way to achieve your goal esp if you use an adaptive allocation strategy. Again, read through the thread I know it’s a lot but if you’re honestly interested in making a legit return it’s well worth your time.
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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

RocketShipTech wrote: Mon Jul 13, 2020 8:41 am
BayStater wrote: Mon Jul 13, 2020 8:39 am
taojaxx wrote: Mon Jul 13, 2020 4:30 am For those with a margin account at IB, PV shows that VTI+EDV leveraged 3 times is a superior alternative to UPRO/TMF. 8.5 higher CAGR, better Sharpe, better Sortino, lower US market correlation. Max drawdown and SD are slightly higher though.
I thought the issue was when you do this in a margin account there's not a daily leverage reset. So it's not a 1:1 comparison to the HEDGEFUNDIE strategy. I don't recall the specifics, but I believe running in a margin account has different risks than UPRO/TMF.
Trading volatility decay for callable debt. Not a good trade IMO
You could always use margin, rebalance leverage once it gets a little out of bounds, and end up with a strategy similar to HEDGEFUNDIE's with lower expense ratios.
taojaxx wrote: Mon Jul 13, 2020 5:31 pm For a margin call to trigger requirements for extra funds, your equity has to be exhausted and then your account needs to show a net debit position.
I think a margin call will trigger well before your equity becomes zero (I assume that's what you mean by "exhausted"?).

I didn't understand the comment about the net debit position. Are you saying that, when using margin and when everything goes well, your cash balance is not negative but once the market drops enough to force a margin call, the cash balance will finally become a debit (a negative number)?
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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UpsetRaptor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by UpsetRaptor »

MetaPhysician wrote: Mon Jul 13, 2020 5:18 pm
Yes, I have read them. They fail to include the rich insight from other posters, though.

I could be wrong, oftentimes I am, however I feel there are multiple questions that have been posted in threads that have been previously answered. Perhaps having them in a clear easy to read guide (instead of searching and scrolling) might be helpful to some. Sounds like you wouldn't find it helpful, though, which is absolutely fine.
I see what you're saying, as everyone generally likes a one-stop cliffnotes version of things. However, even if that could exist here (which is debatable, given all the nuances), instead folks intrigued by this idea generally have to read through much discussion of pros/cons to flesh it all out. Is that a feature or a bug? This isn't the 3-fund portfolio.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

glenmalan wrote: Mon Jul 13, 2020 9:34 pmFor the Adaptive model, how many timing periods are you using? I use 1.
Volatility Trading Days? I use 21
Allocation weight method? I use inverse volatility
Trading Frequency? I use monthly
This is the setup, for me, with either TQQQ/TMF, or QLD/UBT.

https://www.portfoliovisualizer.com/te ... odWeight=0
oracle101
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by oracle101 »

randyharris wrote: Mon Jul 13, 2020 7:18 pm
MetaPhysician wrote: Mon Jul 13, 2020 5:57 pm That's a good point. There is some suspense in wondering what will come next.
btw - keeping in mind that the past performance does not predict future performance...

Image

What is the Adaptive 3x model ?
oracle101
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by oracle101 »

randyharris wrote: Mon Jul 13, 2020 11:05 pm
glenmalan wrote: Mon Jul 13, 2020 9:34 pmFor the Adaptive model, how many timing periods are you using? I use 1.
Volatility Trading Days? I use 21
Allocation weight method? I use inverse volatility
Trading Frequency? I use monthly
This is the setup, for me, with either TQQQ/TMF, or QLD/UBT.

https://www.portfoliovisualizer.com/te ... odWeight=0

Why TQQQ ?

Nasdaq seems less negatively correlated than S&P, and benefiting from tech tailwinds which is skewing results to be more positive over past decade and not entirely the point of pairing with TMF imo.
stormcrow
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by stormcrow »

UpsetRaptor wrote: Mon Jul 13, 2020 10:59 pm
However, even if that could exist here (which is debatable, given all the nuances), instead folks intrigued by this idea generally have to read through much discussion of pros/cons to flesh it all out. Is that a feature or a bug? This isn't the 3-fund portfolio.
Completely agree. Jumping into this should be a measured decision, not a three step process. I love the strategy, but have also spent hours reading and tinkering. If it all goes south, it's on me.
perfectuncertainty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by perfectuncertainty »

randyharris wrote: Mon Jul 13, 2020 11:05 pm
glenmalan wrote: Mon Jul 13, 2020 9:34 pmFor the Adaptive model, how many timing periods are you using? I use 1.
Volatility Trading Days? I use 21
Allocation weight method? I use inverse volatility
Trading Frequency? I use monthly
This is the setup, for me, with either TQQQ/TMF, or QLD/UBT.

https://www.portfoliovisualizer.com/te ... odWeight=0
Thanks Randy. Any thoughts on inverse volatility for the weighting method?
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danyboy7
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danyboy7 »

Hi everyone
I'm an european investitor and I have been around here for a while,love all you americans,always excellent stuff
I have a question for all of you guys. My broker has available upro,tmf and also upro qqq
The only problem is that all those etfs have dividend distribution and when i get them,I'm automatically paying taxes (37%)
What should I do in order to succesfully apply the strategy 55% upro 45% tmf or a cocktail of nasdaq+sp500 with tmf ?
Thanks in advance
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hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

danyboy7 wrote: Tue Jul 14, 2020 11:49 am Hi everyone
I'm an european investitor and I have been around here for a while,love all you americans,always excellent stuff
I have a question for all of you guys. My broker has available upro,tmf and also upro qqq
The only problem is that all those etfs have dividend distribution and when i get them,I'm automatically paying taxes (37%)
What should I do in order to succesfully apply the strategy 55% upro 45% tmf or a cocktail of nasdaq+sp500 with tmf ?
Thanks in advance
Paying the taxes would be one solution.

How much would you pay per year?
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danyboy7
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danyboy7 »

hilink73 wrote: Tue Jul 14, 2020 2:54 pm
danyboy7 wrote: Tue Jul 14, 2020 11:49 am Hi everyone
I'm an european investitor and I have been around here for a while,love all you americans,always excellent stuff
I have a question for all of you guys. My broker has available upro,tmf and also upro qqq
The only problem is that all those etfs have dividend distribution and when i get them,I'm automatically paying taxes (37%)
What should I do in order to succesfully apply the strategy 55% upro 45% tmf or a cocktail of nasdaq+sp500 with tmf ?
Thanks in advance
Paying the taxes would be one solution.

How much would you pay per year?
Dividends and selling are taxed at 37%
My question is,is worth to try Hedgefundie seeing the tax problem,will I see similar cagr return ? I didn't find any leveraged sp500 and treasury that are accumulating dividends and not distributing them.
I have seen the light
NMBob
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

morningstar 3 year tax cost ratio:

vti .64
upro .14
tmf .41
tqqq .02
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danyboy7
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danyboy7 »

NMBob wrote: Tue Jul 14, 2020 3:26 pm morningstar 3 year tax cost ratio:

vti .64
upro .14
tmf .41
tqqq .02
If I'm not wrong, Hedgefundie original strategy was using distributing etfs,which in US should be suffering 15% taxation
If I would copy him,my taxation is more than double...could I simulate this situation in Portfoliovisualizer to see if it is still worth it ?
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sf1988
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by sf1988 »

How would one go about setting up the Adaptive Allocation for TQQQ / TMF model in excel / google sheets? I'm already pulling in the prices etc. but the weights i'm getting for each month in historical period, don't seem to match the PV weights from above.

Thanks for the help!
NMBob
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

at danyboy...

I think most think it would be too difficult to do this in a taxable account, which is what you described.

i am sorry, i missed the "and selling". These are low dividend payers, distributions at .37 tax are likely not a big concern as the distributions are smaller than most things and lower than vti which is seen as tax efficient.

however, Selling to rebalance would require tax lost harvesting pairs to have even a chance to offset the gains in the usa. upro and spxl are 3x stock that can be traded out for tax loss harvesting in the usa. One problem is there is not good tax lost harvesting match for tmf. in the usa, maybe you could change percentages and run for 30 days to avoid wash sale, a bond side of ubt at 2x.

the issue of conducting this in taxable account has been addressed a few times. here is a guy who posted wonderfully about trying the adventure in taxable account.

viewtopic.php?f=10&t=272007&p=4691039&h ... 5#p4691039



i have some of this in taxable, and i am at much lower rates than you, and have done some tax loss harvesting to rebalance. But i am not sure how long i can get away with it working out. it may also depend on size. if balance is small, then new contributions can help to rebalance while the account is small.
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danyboy7
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danyboy7 »

NMBob wrote: Tue Jul 14, 2020 4:47 pm at danyboy...

I think most think it would be too difficult to do this in a taxable account, which is what you described.

i am sorry, i missed the "and selling". These are low dividend payers, distributions at .37 tax are likely not a big concern as the distributions are smaller than most things and lower than vti which is seen as tax efficient.

however, Selling to rebalance would require tax lost harvesting pairs to have even a chance to offset the gains in the usa. upro and spxl are 3x stock that can be traded out for tax loss harvesting in the usa. One problem is there is not good tax lost harvesting match for tmf. in the usa, maybe you could change percentages and run for 30 days to avoid wash sale, a bond side of ubt at 2x.

the issue of conducting this in taxable account has been addressed a few times. here is a guy who posted wonderfully about trying the adventure in taxable account.

viewtopic.php?f=10&t=272007&p=4691039&h ... 5#p4691039



i have some of this in taxable, and i am at much lower rates than you, and have done some tax loss harvesting to rebalance. But i am not sure how long i can get away with it working out. it may also depend on size. if balance is small, then new contributions can help to rebalance while the account is small.
Thanks a lot NMBob
Sorry,for selling I mean that I have a 37% taxation for every capital gain,excluding treasury bonds USA which are taxated at 12,5%
Su upro gains taxated at 37% and tmf gains at 12.5%
I agree with you,dividend's major taxation is almost irrelevant.I could accumulate them and then reinvest it into porfolio by helping to keep original balance.
I decided to allocate a small % of my total capital,we are talking about 1k-2k usd. I would rebalance it quarterly by adding capital as long as possible and then by selling.What do you think ?
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Semantics
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Semantics »

sf1988 wrote: Tue Jul 14, 2020 3:51 pm How would one go about setting up the Adaptive Allocation for TQQQ / TMF model in excel / google sheets? I'm already pulling in the prices etc. but the weights i'm getting for each month in historical period, don't seem to match the PV weights from above.

Thanks for the help!
I use the "Asset Correlations" tool on PV and take the standard deviation and correlation matrix (I use min variance) for the last N days. The weights may not match if your data source only contains prices rather than total returns including dividends.

For example:

Image

So the June inverse volatility weight for UPRO is (1/4.25) / (1/4.25 + 1/2.99). This matches what the adaptive allocation tool uses.
thermo
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by thermo »

Semantics wrote: Tue Jul 14, 2020 6:39 pm
sf1988 wrote: Tue Jul 14, 2020 3:51 pm How would one go about setting up the Adaptive Allocation for TQQQ / TMF model in excel / google sheets? I'm already pulling in the prices etc. but the weights i'm getting for each month in historical period, don't seem to match the PV weights from above.

Thanks for the help!
I use the "Asset Correlations" tool on PV and take the standard deviation and correlation matrix (I use min variance) for the last N days. The weights may not match if your data source only contains prices rather than total returns including dividends.

For example:

Image

So the June inverse volatility weight for UPRO is (1/4.25) / (1/4.25 + 1/2.99). This matches what the adaptive allocation tool uses.
Has anyone made a Google sheets for calculating the minimum variance weights necessary to implement the adaptive allocation approach? :D
NMBob
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

some basic info on adaptive allocation .....

in the search box, "Hedgefundie adaptive allocation"

https://www.google.com/search?sitesearc ... allocation

the 4th listing, Volatility Managed Portfolio looks like a good place to start
taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

privatefarmer wrote: Mon Jul 13, 2020 10:10 pm
taojaxx wrote: Mon Jul 13, 2020 9:16 pm
RocketShipTech wrote: Mon Jul 13, 2020 7:58 pm
taojaxx wrote: Mon Jul 13, 2020 7:22 pm
RocketShipTech wrote: Mon Jul 13, 2020 6:17 pm

Think about what you’re saying. You agree with me that a margin call means you need to put in more money, you’re just claiming that it can never happen. You are wrong about that, btw. It has nothing to do with the circuit breakers.
It never happens for a reason: leverage is limited to 3X on assets that do not lose 1/3 in a day. Do you or did someone you know ever have a margin account lol?
Hey buddy I don’t know who you think you are but you’re the one who needs to re-educate yourself on margin accounts.

$100k equity with $300k market exposure gives you 3x leverage and 33% equity.
Most brokers require at least 25% equity.
If your VOO/TLT combo drops 15% in one day, your new market exposure is $255k, and your equity is $55k, meaning you now have only 21% equity. Margin call time. You need to come up with $9k to bring your equity up to 25%.

This would never happen with LETFs. Oh, and most brokers require 50% margin on positions held overnight.
"Buddy",I'm sure you think quite highly of who you think you are.You indeed sound like you have a lot of respect for yourself.
Who told you the adventure was 100% of my account? The broker looks at margin vs. total account value.
Plus, I can modulate my leverage on rough days just as well as the UPRO guys do, without paying the management fee.
Please take the time to read through the thread. I tried this exact strategy via portfolio margin at interactive brokers and got burned in March during the drawdown. Margin call. Forced to deleverage at the worst possible time. IB will decide, on a whim, to increase your margin requirements when things get scary if you use portfolio margin. I still use margin but only a very little, giving myself a VERY large cushion should the market drop. LETFs are a fantastic way to achieve your goal esp if you use an adaptive allocation strategy. Again, read through the thread I know it’s a lot but if you’re honestly interested in making a legit return it’s well worth your time.
@privatefarmer
I read it indeed and followed your particular experience.
My point is you can only run the adventure on VTI/EDV on margin if your adventure is (as in my case) a small part of your overall IB portfolio so whatever margin you use for the adventure is well within the total Reg T margin of your account, so you avoid margin calls even in rough times. Portfolio margin is unreliable as it is indeed a "privilege" that can be taken away from you any time, and that of course happens at the worst possible moment.
I am well aware of the fact that, should the adventure grow so big that it would comprise a majority of your portfolio, then 3X LETF become the only available option to keep going.
Thank you all who keep the discussion informative and non patronizing. I learned a lot going through the tons of posts.
thermo
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by thermo »

NMBob wrote: Tue Jul 14, 2020 7:18 pm some basic info on adaptive allocation .....

in the search box, "Hedgefundie adaptive allocation"

https://www.google.com/search?sitesearc ... allocation

the 4th listing, Volatility Managed Portfolio looks like a good place to start
Perfect thank you.

Has anyone built a Google sheets to calculate the forward weights?
sf1988
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by sf1988 »

thermo wrote: Tue Jul 14, 2020 7:01 pm
Semantics wrote: Tue Jul 14, 2020 6:39 pm
sf1988 wrote: Tue Jul 14, 2020 3:51 pm How would one go about setting up the Adaptive Allocation for TQQQ / TMF model in excel / google sheets? I'm already pulling in the prices etc. but the weights i'm getting for each month in historical period, don't seem to match the PV weights from above.

Thanks for the help!
I use the "Asset Correlations" tool on PV and take the standard deviation and correlation matrix (I use min variance) for the last N days. The weights may not match if your data source only contains prices rather than total returns including dividends.

For example:

Image

So the June inverse volatility weight for UPRO is (1/4.25) / (1/4.25 + 1/2.99). This matches what the adaptive allocation tool uses.
Has anyone made a Google sheets for calculating the minimum variance weights necessary to implement the adaptive allocation approach? :D
Thank you, this was helpful.

I used this, plus googleSheets pulls for price (I understand not including dividends will throw this off somewhat), and am getting pretty close weights to what the tool suggests now.

For now, I will monitor this, see how my googl sheets tracks vs. the PV results for weights, and consider switching to AA method vs. just straight 55/45 TQQQ/TMF. My plan will be to use googlesheets as tracker / early warning, and confirm final recommended AA weights using PV.

I'm new to bogleheads, but not investing/trading, and started doing this in my Roth IRA with about 10K. I may consider putting all my future contributions to this to accelerate the growth/accumulation phase.
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

randyharris wrote: Mon Jul 13, 2020 7:18 pm
MetaPhysician wrote: Mon Jul 13, 2020 5:57 pm That's a good point. There is some suspense in wondering what will come next.
btw - keeping in mind that the past performance does not predict future performance...

Image
My crystal ball is cloudy :wink:
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MetaPhysician
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MetaPhysician »

markcloutier1212 wrote: Mon Jul 13, 2020 11:05 am With hundreds of pages its kind of hard to tell -- but is there any new consensus on the ideal rebalancing schedule for Hedgefundie's 45/55 TMF/UPRO approach? Is it 10% bands, quarterly, or something else?
This is kind of what inspired me to ask the original question.
privatefarmer wrote: Mon Jul 13, 2020 10:10 pm Please take the time to read through the thread.
Another one.
UpsetRaptor wrote: Mon Jul 13, 2020 10:59 pm I see what you're saying, as everyone generally likes a one-stop cliffnotes version of things. However, even if that could exist here (which is debatable, given all the nuances), instead folks intrigued by this idea generally have to read through much discussion of pros/cons to flesh it all out. Is that a feature or a bug? This isn't the 3-fund portfolio.
That's fair. I thought about having 'pro v con' type layout. But then I wonder: who exactly would read this book? Perhaps there is a section for beginners, intermediates, and advanced readers. For example, the beginners might have an overview with straightforward answers. The intermediate level might have the rationale behind it. The advanced would have all the nuances (as you pointed out) and the hotly debated points. I suspect there are more beginners and intermediates than advanced level people, though, so I was thinking about writing it towards that level.
stormcrow wrote: Tue Jul 14, 2020 8:25 am Completely agree. Jumping into this should be a measured decision, not a three step process. I love the strategy, but have also spent hours reading and tinkering. If it all goes south, it's on me.
Perhaps I wasn't clear - this won't be a simple three-step process. Rather, it would be easier to search, laid out with better organization, more polished presentation, etc.

I suspect there are people who don't have the time to read through 200+ pages and spend a few days doing so. I could just be living in my own bubble in the doctor's lounge. I get the sense this board has a lot of engineers, people in tech, etc who have more free time. This is just my personal observation without any verifiable data, though.
NMBob wrote: Tue Jul 14, 2020 7:18 pm some basic info on adaptive allocation .....

in the search box, "Hedgefundie adaptive allocation"

https://www.google.com/search?sitesearc ... allocation

the 4th listing, Volatility Managed Portfolio looks like a good place to start
My point again.
Gufomel
Posts: 548
Joined: Sat Feb 14, 2015 9:52 pm

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Gufomel »

How does demand impact the prices of leveraged ETFs like UPRO?

If UPRO is supposed to match 3x daily S&P return, what happens if there’s suddenly high demand for UPRO? Wouldn’t its price go up more than 3x S&P? Is it assumed that arbitragers would quickly take advantage and the price would settle back so that the daily return is 3x S&P?

I guess the question above is only related to intra-day prices. But my bigger question is related to long-term impacts of leveraged ETF strategies becoming increasingly popular. I thought I saw comments a while back about how it’s possible that increased popularity of leveraged ETFs could lead future returns to not be as great as we’ve seen in the past (obviously there’s many things that could lead to this, but I’m wondering specifically about the impacts of increased demand for leveraged ETFs). But how could demand specifically for leveraged ETFs have any impact on their returns? Isn’t it always going to match 3x (or 2x) of the daily return of the underlying security? I guess it’s ultimately increasing demand for the underlying security (in this case 3x demand for the S&P) so it could drive a bubble in the underlying security and thus an even bigger bubble for those invested in the leveraged fund?

Hope that makes sense what I’m asking.
taojaxx
Posts: 111
Joined: Wed Jul 18, 2012 8:25 pm

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

Gufomel wrote: Wed Jul 15, 2020 6:19 am How does demand impact the prices of leveraged ETFs like UPRO?

If UPRO is supposed to match 3x daily S&P return, what happens if there’s suddenly high demand for UPRO? Wouldn’t its price go up more than 3x S&P? Is it assumed that arbitragers would quickly take advantage and the price would settle back so that the daily return is 3x S&P?

I guess the question above is only related to intra-day prices. But my bigger question is related to long-term impacts of leveraged ETF strategies becoming increasingly popular. I thought I saw comments a while back about how it’s possible that increased popularity of leveraged ETFs could lead future returns to not be as great as we’ve seen in the past (obviously there’s many things that could lead to this, but I’m wondering specifically about the impacts of increased demand for leveraged ETFs). But how could demand specifically for leveraged ETFs have any impact on their returns? Isn’t it always going to match 3x (or 2x) of the daily return of the underlying security? I guess it’s ultimately increasing demand for the underlying security (in this case 3x demand for the S&P) so it could drive a bubble in the underlying security and thus an even bigger bubble for those invested in the leveraged fund?

Hope that makes sense what I’m asking.
Someone out there will be ready to arbitrage the difference shorting overpriced UPROs. That's probably going to be the issuer short the stock on one side nd long the basket/swaps on the other. Same for the size of the funds I guess.
Bigger concern is if issuer delists, as they did on other funds, or increases management fees.
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