HEDGEFUNDIE's excellent adventure Part II: The next journey

[MotoTrojan]

Also, I know we're probably beating a dead-horse when US Treasury stopped issuing callable bonds in 1985, but I really do think that skews the valuation of prior periods and have made the long end of the curve a decent attractive asset going forward. So much discussion has been dedicated to looking at 1955-1982, and I honestly can't see the point if treasuries were a completely different instrument during those time periods. Sorry if I missed the conclusion of that discussion

Even if this suggests that treasuries won't go shooting up to double digits (crushing the portfolio), how does this indicate that 1982-present is a more reasonable assumption, with rates starting in the double digits?

[ltdshred]

Also, I know we're probably beating a dead-horse when US Treasury stopped issuing callable bonds in 1985, but I really do think that skews the valuation of prior periods and have made the long end of the curve a decent attractive asset going forward. So much discussion has been dedicated to looking at 1955-1982, and I honestly can't see the point if treasuries were a completely different instrument during those time periods. Sorry if I missed the conclusion of that discussion

Even if this suggests that treasuries won't go shooting up to double digits (crushing the portfolio), how does this indicate that 1982-present is a more reasonable assumption, with rates starting in the double digits?

Because I think we should be comparing apples to apples? Bonds 101 that callable securities exhibit different convexities compared to vanilla, regardless where rates start historically.

[MotoTrojan]

Also, I know we're probably beating a dead-horse when US Treasury stopped issuing callable bonds in 1985, but I really do think that skews the valuation of prior periods and have made the long end of the curve a decent attractive asset going forward. So much discussion has been dedicated to looking at 1955-1982, and I honestly can't see the point if treasuries were a completely different instrument during those time periods. Sorry if I missed the conclusion of that discussion

Even if this suggests that treasuries won't go shooting up to double digits (crushing the portfolio), how does this indicate that 1982-present is a more reasonable assumption, with rates starting in the double digits?

Because I think we should be comparing apples to apples? Bonds 101 that callable securities exhibit different convexities compared to vanilla, regardless where rates start historically.

You’re calling today apples to apples with 1982? Without the oranges (callable) then 1982 wouldn’t have been what it was, no?

[ltdshred]

Also, I know we're probably beating a dead-horse when US Treasury stopped issuing callable bonds in 1985, but I really do think that skews the valuation of prior periods and have made the long end of the curve a decent attractive asset going forward. So much discussion has been dedicated to looking at 1955-1982, and I honestly can't see the point if treasuries were a completely different instrument during those time periods. Sorry if I missed the conclusion of that discussion

Even if this suggests that treasuries won't go shooting up to double digits (crushing the portfolio), how does this indicate that 1982-present is a more reasonable assumption, with rates starting in the double digits?

Because I think we should be comparing apples to apples? Bonds 101 that callable securities exhibit different convexities compared to vanilla, regardless where rates start historically.

You’re calling today apples to apples with 1982? Without the oranges (callable) then 1982 wouldn’t have been what it was, no?

Sorry, what I meant was there was a lot of dedicated discussion on how this strategy performed over the 1955-1982 time period whereas my argument is that it should be discounted because bonds became uncallable in 1985. I believe OP's original backtest only went to 1987.

[MotoTrojan]

Also, I know we're probably beating a dead-horse when US Treasury stopped issuing callable bonds in 1985, but I really do think that skews the valuation of prior periods and have made the long end of the curve a decent attractive asset going forward. So much discussion has been dedicated to looking at 1955-1982, and I honestly can't see the point if treasuries were a completely different instrument during those time periods. Sorry if I missed the conclusion of that discussion

Even if this suggests that treasuries won't go shooting up to double digits (crushing the portfolio), how does this indicate that 1982-present is a more reasonable assumption, with rates starting in the double digits?

Because I think we should be comparing apples to apples? Bonds 101 that callable securities exhibit different convexities compared to vanilla, regardless where rates start historically.

You’re calling today apples to apples with 1982? Without the oranges (callable) then 1982 wouldn’t have been what it was, no?

Sorry, what I meant was there was a lot of dedicated discussion on how this strategy performed over the 1955-1982 time period whereas my argument is that it should be discounted because bonds became uncallable in 1985. I believe OP's original backtest only went to 1987.

Yes OP originally went to 1987, and then 1982-present was shown as it also boded well (right when rates started coming down). I guess what I am saying is that we are most likely to be somewhere between the two strategies, which is what starts to lean towards S&P500-like returns but with WAY more volatility.

[guillemot]

I will try to keep this updated as I find more of them.

The siamond data: viewtopic.php?p=4426310#p4426310
How to use data with Portfolio Visualizer website: viewtopic.php?p=4578095#p4578095
Backtest of different strategies 1955 to 2019: viewtopic.php?p=4621491#p4621491

[LadyGeek]

guillemot, Welcome!

FYI - We can create a dedicated wiki page for those posts.

[Gemini]

Officially out, have fun all!

What made you abandon?

[Lee_WSP]

Officially out, have fun all!

What made you abandon?

Too much risk for not enough expected return.

[MotoTrojan]

Officially out, have fun all!

What made you abandon?

Too much risk for not enough expected return.

Bingo. Decided to diversify my risk into some other classes like ISCV, and take a nice quick profit.

FWIW the OPs higher risk 55/45 UPRO/TMF seems more worth the risk than my 43/57 UPRO/EDV was.

[SloDoc]

Hi all,
I'm a newly registered BH though I've read the site from the sidelines for years.
I read Lifecycle Investing and liked some of the premise. While gathering more info on leverage plays, I came across Hedgefundie's adventure.
For 2020 I plan to mimick Hedgefundie's bet in my own account as my situation is similar. I only mention the details to suggest the risk is appropriate for me.
37 with stable job/nice income, No debt and house just paid off, 3 kids of very young age with ~300K in 529 plans.
Also willing to put 15% of liquid assets (~500k) into a separate strategy, not interested in hassle of options/futures, goal of 10M over time.

I've seen recent debate regarding UPRO vs TQQQ. Has anyone considered a 50/50 split between the two for the equity portion? Also, given that volatility is an enemy of LETFs has anyone considered applying a trend following system since most volatility comes from prices below various moving averages?

[Hydromod]

I've seen recent debate regarding UPRO vs TQQQ. Has anyone considered a 50/50 split between the two for the equity portion? Also, given that volatility is an enemy of LETFs has anyone considered applying a trend following system since most volatility comes from prices below various moving averages?

I'm currently using an adaptive scheme that considers a UPRO/TMF part and a TQQQ/TMF part. Both pairs are weighted according to downward-only variance and a risk factor based on the unemployment rate. Currently equities are assigned 70 % of the risk, which is what I've set for maximum "risk on" posture.

The balance between the UPRO and TQQQ portions is calculated using with risk-weighted downward-only variance. Currently I have 1/3 of risk to UPRO and 2/3 to TQQQ.

With this approach, the current weight fraction is 27/51/21 for UPRO/TQQQ/TMF.

I'm still exploring how quickly I'll change the risk fraction to equities as the unemployment rate changes, but I expect that the fastest for full risk on to full risk off will occur in monthly increments over around 4 months. The fastest risk return may be the same or slower.

See Refinements to Hedgefundie's excellent approach for some of the backtesting basis, especially near the end of the thread. I haven't fully laid out my strategy there, since I'm still polishing.

[igglywiggly]

No rebalancing done in my calculations. I can go back to 1929 if you wish with the backtesting.

Period (1955 - 2018, 10'000$ initial, 1'000$ monthly)
Portfolio 1 = 65% SPY (100%) + 35% UPRO (300%) = 170% leverage
Portfolio 2 = 50% SPY (100%) + 30% SSO (200%)+ 20% UPRO (300%) = 170% leverage
Portfolio 3 = 30% SPY (100%) + 70% SSO (200%) = 170% leverage
Portfolio 4 = 100% SPY (100%)

Endvalues:

Portfolio 1 = 12.02m $
Portfolio 2 = 19.74m $
Portfolio 3 = 30.03m $
Portfolio 4 = 12.65m $

I was not able to replicate your results using the Siamond spreadsheet. Please post your dataset.

Total - Rebalanced
Portfolio 1: 13,095,339
Portfolio 2:11,134,542
Portfolio 3: 14,758,360
Portfolio 4: 4,661,186


Total - Not Rebalanced
Portfolio 1: 5,135,675
Portfolio 2: 6,114,577
Portfolio 3: 5,610,165
Portfolio 4: 4,661,186

Although both back tests indicate that SSO may be worth taking another look at.

So I just made a backtest using RayKeynes dataset.

2000$/month from 01.01.1989-01.11.2019
50% SPY 50% SSO

Rebalanced with 10% absolut bands:

01.01.1989-30.10.1996
152'871 SPY 229'194 SSO -> 191'033 SPY 191'033 SSO
30.10.1996-31.12.1998
367'026 SPY 553'108 SSO -> 460'067 SPY 460'067 SSO
31.12.1998-30.06.2002
399'656 SPY 262'616 SSO -> 331'136 SPY 331'136 SSO
30.06.2002-30.11.2008
355'703 SPY 229'135 SSO -> 292'419 SPY 292'419 SSO
30.11.2008-30.04.2013
588'687 SPY 887'857 SSO -> 738'272 SPY 738'272 SSO
30.04.2013-31.07.2017
1'197'223 SPY 1'805'471 SSO -> 1'501'347 SPY 1'501'347 SSO
31.07.2017-01.11.2019
1'884'268 SPY 2'229'114 SSO = 4'113'382

No rebalancing: 4'022'696
100% SPY: 2'228'372

That's almost 31 years and almost no effect. It's pure coincidence that rebalancing turned out to be slightly better. But it might help you sleep better at night.

So even if we have a 2008 crash right now, we would be looking at:

100% SPY: ~1100k
50% SPY 50% SSO not rebalanced: ~1400k
50% SPY 50% SSO rebalanced: ~1590k

150% leverage is ****** awesome!

You guys are all over the place with this..... Ray first was backtesting to 1955 to the present.... and wondering why rebalancing helped so much. That's over 60 years.... not 31.

It's very simple..... your ongoing contributions are doing much of the natural rebalancing for the a very long time to begin with when starting from zero.... only once you get much further out would the annual rebalancing start making a huge difference. You are now doing $2k/mo over 30 years compared with $1k/mo over 65 years.....

Also since 1989.... ongoing consistent contributions have provided a time weighted ROR of roughly 11% for the SP500. It was a tremendous 30 years to be a dollar cost averager.


The idea that 150% constant leverage is mathematically ideal from history - going back to the 1920s - is something that's been discussed on here quite a bit already, and has been found in other academic white papers that are out there.

The root discussion of rebalancing really was why would you ever use SSO.... when you could get the same leverage at lower ER by using more SP500 and then adding UPRO.

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

[Lee_WSP]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

[igglywiggly]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

Did your backtest take the different ER for each portfolio into account? I’m debating on the best strategy for my taxable account and I’m hung up on the lower ER of UPRO/SPY vs the smaller drawdowns + less rebalancing needed to maintain 170% leverage due to less volatility for SSO/SPY.

[rascott]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

Did your backtest take the different ER for each portfolio into account? I’m debating on the best strategy for my taxable account and I’m hung up on the lower ER of UPRO/SPY vs the smaller drawdowns + less rebalancing needed to maintain 170% leverage due to less volatility for SSO/SPY.

I don't know what he used.... or how frequently he was rebalancing. On an extreme level.... if you rebalanced every day.... they should all perform the same.... including 'regular'
leverage (using futures/ options, for example) minus the ERs.

The less you rebalance the LETFs... the more they will drift from your target leverage ratio. And UPRO is going to drift more than SSO, obviously. Taxable accounts make it more difficult.... and I really don't know what the ideal is.

The tax penalty from having to reset your leverage more often with UPRO may or may not exceed the higher ER of using more SSO..... and I'd think it would be impossible to predict with any certainty, as it would likely be dependent upon the path the market takes in the future.

[Lee_WSP]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

Did your backtest take the different ER for each portfolio into account? I’m debating on the best strategy for my taxable account and I’m hung up on the lower ER of UPRO/SPY vs the smaller drawdowns + less rebalancing needed to maintain 170% leverage due to less volatility for SSO/SPY.

The dataset is the Siamond spreadsheet available to everyone.

If the initial drop takes a few days and the recovery takes a few years, the leveraged fund will severely under perform the 2x/3x of the benchmark because of the daily reset. The more leverage, the worse you'll do. Daily reset funds take longer to recover than a theoretical uncallable margin loan of the same initial leverage (because the margin loan increases the leverage as the underlying asset drops in value).

[guyinlaw]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

Did your backtest take the different ER for each portfolio into account? I’m debating on the best strategy for my taxable account and I’m hung up on the lower ER of UPRO/SPY vs the smaller drawdowns + less rebalancing needed to maintain 170% leverage due to less volatility for SSO/SPY.

I don't know what he used.... or how frequently he was rebalancing. On an extreme level.... if you rebalanced every day.... they should all perform the same.... including 'regular'
leverage (using futures/ options, for example) minus the ERs.

The less you rebalance the LETFs... the more they will drift from your target leverage ratio. And UPRO is going to drift more than SSO, obviously. Taxable accounts make it more difficult.... and I really don't know what the ideal is.

The tax penalty from having to reset your leverage more often with UPRO may or may not exceed the higher ER of using more SSO..... and I'd think it would be impossible to predict with any certainty, as it would likely be dependent upon the path the market takes in the future.

If want to get to 170% of SPY and investing more than $10k wouldn't be so much better to use SPY leaps OR futures.

You can see others who have implemented using SPY leaps.
viewtopic.php?p=4880456#p4880456

I hold micro E-mini Futures for S&P and Russel 2000. One micro E-mini gives exposure to 5X the benchmark. Brokerage needs only ~5% cash, but I hold around 30% more in cash eq - ICSH.

For example you can implement an 80-20 portfolio with SPY-EDV using E-mini

1 micro e-Mini(5x) $15,000
EDV $3,750
ICSH (cash eq) $4,500

PV Link

https://seekingalpha.com/article/299100 ... ot-futures

Whatever you do make sure your leverage of your portfolio is under 200%. My current leverage is around 110%

[rascott]

Rascott what you're saying here makes sense to me logically but what do you think is accounting for the SSO/SPY portfolio outperforming the UPRO/SPY portfolio in Lee's backtests?

Smaller drawdowns.

Did your backtest take the different ER for each portfolio into account? I’m debating on the best strategy for my taxable account and I’m hung up on the lower ER of UPRO/SPY vs the smaller drawdowns + less rebalancing needed to maintain 170% leverage due to less volatility for SSO/SPY.

I don't know what he used.... or how frequently he was rebalancing. On an extreme level.... if you rebalanced every day.... they should all perform the same.... including 'regular'
leverage (using futures/ options, for example) minus the ERs.

The less you rebalance the LETFs... the more they will drift from your target leverage ratio. And UPRO is going to drift more than SSO, obviously. Taxable accounts make it more difficult.... and I really don't know what the ideal is.

The tax penalty from having to reset your leverage more often with UPRO may or may not exceed the higher ER of using more SSO..... and I'd think it would be impossible to predict with any certainty, as it would likely be dependent upon the path the market takes in the future.

If want to get to 170% of SPY and investing more than $10k wouldn't be so much better to use SPY leaps OR futures.

You can see others who have implemented using SPY leaps.
viewtopic.php?p=4880456#p4880456

I hold micro E-mini Futures for S&P and Russel 2000. One micro E-mini gives exposure to 5X the benchmark. Brokerage needs only ~5% cash, but I hold around 30% more in cash eq - ICSH.

For example you can implement an 80-20 portfolio with SPY-EDV using E-mini

1 micro e-Mini(5x) $15,000
EDV $3,750
ICSH (cash eq) $4,500

PV Link

https://seekingalpha.com/article/299100 ... ot-futures

Whatever you do make sure your leverage of your portfolio is under 200%. My current leverage is around 110%

Yes I hold a few micro contacts currently..... but they aren't very granular at $15k increments. Pls you have to actively monitor them... it's not been such a big deal now.... but if we get into a high volatility down market.... your account with equity futures can go a little haywire if you aren't paying attention

[guyinlaw]

Yes I hold a few micro contacts currently..... but they aren't very granular at $15k increments. Pls you have to actively monitor them... it's not been such a big deal now.... but if we get into a high volatility down market.... your account with equity futures can go a little haywire if you aren't paying attention

For 1 micro contract, I hold ~$1,000 in cash and $3,500 in cash equivalent ICSH. If the market drops I sell some ICSH to maintain the cash.

If one holds with EDV, they can buy/sell it to maintain the desired asset allocation.

Will have to wait and see how i can keep this system going with greater volatility.. my overall leverage is very small, so i hope this will be good.

[parval]

Yes I hold a few micro contacts currently..... but they aren't very granular at $15k increments. Pls you have to actively monitor them... it's not been such a big deal now.... but if we get into a high volatility down market.... your account with equity futures can go a little haywire if you aren't paying attention

For 1 micro contract, I hold ~$1,000 in cash and $3,500 in cash equivalent ICSH. If the market drops I sell some ICSH to maintain the cash.

If one holds with EDV, they can buy/sell it to maintain the desired asset allocation.

Will have to wait and see how i can keep this system going with greater volatility.. my overall leverage is very small, so i hope this will be good.

What's a good broker with low fees if I want to play around with futures to test this? Used to Robinhood no commissions

[guyinlaw]

Yes I hold a few micro contacts currently..... but they aren't very granular at $15k increments. Pls you have to actively monitor them... it's not been such a big deal now.... but if we get into a high volatility down market.... your account with equity futures can go a little haywire if you aren't paying attention

For 1 micro contract, I hold ~$1,000 in cash and $3,500 in cash equivalent ICSH. If the market drops I sell some ICSH to maintain the cash.

If one holds with EDV, they can buy/sell it to maintain the desired asset allocation.

Will have to wait and see how i can keep this system going with greater volatility.. my overall leverage is very small, so i hope this will be good.

What's a good broker with low fees if I want to play around with futures to test this? Used to Robinhood no commissions

I have a Schwab account. They only allow Futures in brokerage account NOT in IRA. (Only IBKR allows futures in IRA). All futures are taxed at 60% LTCG, so I am OK with it.

Trading fees is nominal, under $2/contract. (overall cost under $20/year for 1 micro e-Mini for $15k exposure )

To play with, TD Think and swim has a simulated account where you can trade with paper money. (I haven't used this, but heard good things about it).

https://www.cmegroup.com/education/cour ... -etfs.html

[parval]

Hmm okay. I'm considering this vs LEAPs and that is about $100 due to spread for same 10k 3x exposure but I think tax is even more favorable if I hold the whole year before rolling.

[no simpler]

I keep seeing posts about futures being "better" than options, for reasons that don't make a lot of sense.

Thanks to put-call parity, you should be able to simulate long position through a synthetic long, that is buying a call and selling a put at same strike and maturity. For something as liquid as SPY and TLT, there should not be a material difference in how you establish this position, or there would be an arbitrage opportunity. Also, note that you don't need to worry about dividends or coupon payments; again this is reflected in options prices.

[guillemot]

If you never reset your leverage and you are using enough you will wipe out. It's always 1 over the leverage factor equals a wipeout if you assume no adjustment. So 3x leverage = 33% decline = wipeout, and 1.5 leverage = 67% decline = wipeout. There is a product PPLC by Direxion that gives 1.35x leverage on S&P 500. A drawdown like that (74%) has never happened but it definitely can happen. I think futures is a better deal over this product since futures are cheaper and you are unlikely to wipeout. In practice, if you were using futures, I think you would reset your leverage quarterly when it's time to roll.

I don't know what the advantage of resetting leverage less often is. It seems like all of the downside and none of the upside of daily reset. If you are going to be taking risk, might as well take it. If you never reset leverage, assuming you don't wipe out early, your return profile looks more and more like 1x the further out you go. They reset to keep taking the same risk, not too much or too little.

[caklim00]

Yes I hold a few micro contacts currently..... but they aren't very granular at $15k increments. Pls you have to actively monitor them... it's not been such a big deal now.... but if we get into a high volatility down market.... your account with equity futures can go a little haywire if you aren't paying attention

For 1 micro contract, I hold ~$1,000 in cash and $3,500 in cash equivalent ICSH. If the market drops I sell some ICSH to maintain the cash.

If one holds with EDV, they can buy/sell it to maintain the desired asset allocation.

Will have to wait and see how i can keep this system going with greater volatility.. my overall leverage is very small, so i hope this will be good.

Good idea on holding $1000 in cash and $3500 in cash equivalent. I think I'm going to do something similar for my 2 ZN contracts I hold.

[RandomWord]

If you never reset your leverage and you are using enough you will wipe out. It's always 1 over the leverage factor equals a wipeout if you assume no adjustment. So 3x leverage = 33% decline = wipeout, and 1.5 leverage = 67% decline = wipeout. There is a product PPLC by Direxion that gives 1.35x leverage on S&P 500. A drawdown like that (74%) has never happened but it definitely can happen. I think futures is a better deal over this product since futures are cheaper and you are unlikely to wipeout. In practice, if you were using futures, I think you would reset your leverage quarterly when it's time to roll.

I don't know what the advantage of resetting leverage less often is. It seems like all of the downside and none of the upside of daily reset. If you are going to be taking risk, might as well take it. If you never reset leverage, assuming you don't wipe out early, your return profile looks more and more like 1x the further out you go. They reset to keep taking the same risk, not too much or too little.

By the same logic, you'll "eventually" be wiped out with 1x leverage. Sure, we've never had a 100% decline yet, but it'll "eventually "happen". It might happen a long time after you're dead though.

[Robert T]

.
What 3x leverage can do in a severe bear market using example of gold miners index

GDX – tracks NYSE Arca Gold Miners Index
NUGT – tracks 3x NYSE Arca Gold Miners Index daily returns

-30% GDX = -75% NUGT
-50% GDX = -93% NUGT
-65% GDX = -99% NUGT

$50k investment in each at end December 2010. By Sept. 2018 respective values:
GDX = $15,808
NUGT = $43

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Robert
.

[Stef]

We wouldn't even see -33.4% in one day if nuclear bombs would detonate in major cities.

[Steve Reading]

.
What 3x leverage can do in a severe bear market using example of gold miners index

GDX – tracks NYSE Arca Gold Miners Index
NUGT – tracks 3x NYSE Arca Gold Miners Index daily returns

-30% GDX = -75% NUGT
-50% GDX = -93% NUGT
-65% GDX = -99% NUGT

$50k investment in each at end December 2010. By Sept. 2018 respective values:
GDX = $15,808
NUGT = $43

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Robert

Wait am I seeing this correctly? One share of that ETF was around 15k, 9 years ago. Now it’s just worth 27 dollars. Absolutely brutal.

[Diego_Quant]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

[am]

We wouldn't even see -33.4% in one day if nuclear bombs would detonate in major cities.

Yes because markets would be closed if that we’re to happen. How about if a giant asteroid was about to hit our planet 2 weeks from now? How would the markets react to that

[guyinlaw]

We wouldn't even see -33.4% in one day if nuclear bombs would detonate in major cities.

Black Monday in 1987 was 23% one day drop and there were no bombs then.

Now there are circuit breakers so one day large drops are unlikely, it would be possible over 2-3 days.

https://en.m.wikipedia.org/wiki/Black_Monday_(1987)

[get_g0ing]

.
What 3x leverage can do in a severe bear market using example of gold miners index

GDX – tracks NYSE Arca Gold Miners Index
NUGT – tracks 3x NYSE Arca Gold Miners Index daily returns

-30% GDX = -75% NUGT
-50% GDX = -93% NUGT
-65% GDX = -99% NUGT

$50k investment in each at end December 2010. By Sept. 2018 respective values:
GDX = $15,808
NUGT = $43

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Robert

Wait am I seeing this correctly? One share of that ETF was around 15k, 9 years ago. Now it’s just worth 27 dollars. Absolutely brutal.

Just saw that too. That's insane

[caklim00]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

I don't think that duration only explains everything. There is another poster on here that is using a ton of leverage on 2 year futures since historically there has been better return at the shorter end. Also, there is no way to buy 309,696 of ZN. I have 2 ZN contracts and I just checked my market value is 257,719 at the moment.

[no simpler]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

I don't think that duration only explains everything. There is another poster on here that is using a ton of leverage on 2 year futures since historically there has been better return at the shorter end. Also, there is no way to buy 309,696 of ZN. I have 2 ZN contracts and I just checked my market value is 257,719 at the moment.

it's definitely not all about duration. There is a non-linear relationship between rates, duration, and price.
When regressing TLT on IEF, beta is .4. As in, 1% move in TLT is accompanied by .4% move in IEF

[Diego_Quant]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

[Diego_Quant]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

As in, 1% move in TLT is accompanied by .4% move in IEF

1/0.4 =2.5
I calculated 2.99

[caklim00]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

True, but I guess in your example for TLT why wouldn't you just buy ZB instead of leveraging up ZN. I'm not saying its better, but seems to be a closer apples to apples comparison.

In fact I'm thinking about aborting from the hedgefundie adventure and just add a little more leverage on the bond side. It is interesting logging into M1 every once in awhile to see how its doing.

[rascott]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

I figured out how to use the DV01 numbers from the CME Treasury Analytics tool to determine what combo of contacts to buy to kind of get your portfolio duration roughly where you'd want it. I can't recall it from memory.... have notes in my office....but @305pelusa assisted me with it.

[Steve Reading]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

I figured out how to use the DV01 numbers from the CME Treasury Analytics tool to determine what combo of contacts to buy to kind of get your portfolio duration roughly where you'd want it. I can't recall it from memory.... have notes in my office....but @305pelusa assisted me with it.

Found with a quick Google search. Starting from this post:
viewtopic.php?p=4784086#p4784086
And onwards

[Diego_Quant]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

True, but I guess in your example for TLT why wouldn't you just buy ZB instead of leveraging up ZN. I'm not saying its better, but seems to be a closer apples to apples comparison.

In fact I'm thinking about aborting from the hedgefundie adventure and just add a little more leverage on the bond side. It is interesting logging into M1 every once in awhile to see how its doing.

ZB is different from TLT. Most similar it would be UB

[caklim00]

Hello everyone, mathematical riddle:

1) According to the Ishares website:
TLT Weighted Avg. Maturity = 25.55 years
IEF Weighted Avg. Maturity = 8.54 years
So, 25.55 / 8.54 = 2.9918
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF

2) According to the CME Group website:
ZN Deliverable Maturities = 6.50 to 10 years
So, Deliverable Maturities Average = (6.50 + 10) / 2 = 8.25 years
Then: 8.54 / 8.25 = 1.035151
So:
Buy $ 100,000 of TLT = Buy 299,180 of IEF = Buy $ 309,696 of ZN

TRUE OR FALSE?

Thank you for all your contributions.

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

True, but I guess in your example for TLT why wouldn't you just buy ZB instead of leveraging up ZN. I'm not saying its better, but seems to be a closer apples to apples comparison.

In fact I'm thinking about aborting from the hedgefundie adventure and just add a little more leverage on the bond side. It is interesting logging into M1 every once in awhile to see how its doing.

ZB is different from TLT. Most similar it would be UB

I thought UB was more similar to EDV. Regardless, what is the point of your exercise? I'll be honest I'm still learning here and just choose ZN contracts since it was the closest in duration to the bonds I currently hold today (mostly intermediate) and I wanted to essentially double my bond exposure without having to sell equity. I like the simplicity of NTSX and how it holds an equal percentage at 5 of the 6 futures contracts, but I wasn't quite ready to make that jump yet since holding futures was new to me.

[Diego_Quant]

Also, there is no way to buy 309,696 of ZN.

Yes, I know, but you can buy futures and complete the remaining part with etfs. The numbers cited were only an example

True, but I guess in your example for TLT why wouldn't you just buy ZB instead of leveraging up ZN. I'm not saying its better, but seems to be a closer apples to apples comparison.

In fact I'm thinking about aborting from the hedgefundie adventure and just add a little more leverage on the bond side. It is interesting logging into M1 every once in awhile to see how its doing.

ZB is different from TLT. Most similar it would be UB

I thought UB was more similar to EDV. Regardless, what is the point of your exercise? I'll be honest I'm still learning here and just choose ZN contracts since it was the closest in duration to the bonds I currently hold today (mostly intermediate) and I wanted to essentially double my bond exposure without having to sell equity. I like the simplicity of NTSX and how it holds an equal percentage at 5 of the 6 futures contracts, but I wasn't quite ready to make that jump yet since holding futures was new to me.

My asset allocation is dynamic, this month I had a high percentage for IEF and a low percentage for TLT. I want to group both in a single type of futures, if possible

[elderwise]

Anyone else backed out? just curious -

@Moto what amount of $$ had you vested in it when you were active? Was it taxable or tax deferred?

[MotoTrojan]

Anyone else backed out? just curious -

@Moto what amount of $$ had you vested in it when you were active? Was it taxable or tax deferred?

Put in $21K and change, pulled out $31K and change. It was my entire Roth IRA.

[keith6014]

Anyone else backed out? just curious -

@Moto what amount of $$ had you vested in it when you were active? Was it taxable or tax deferred?

Put in $21K and change, pulled out $31K and change. It was my entire Roth IRA.

If you put the $21k in VFIAX(S&P) and pull out at the same time how much would you lose/gain?

BTW, I really liked your posts. I though you had a 6 figure portfolio in the game.

[MotoTrojan]

Anyone else backed out? just curious -

@Moto what amount of $$ had you vested in it when you were active? Was it taxable or tax deferred?

Put in $21K and change, pulled out $31K and change. It was my entire Roth IRA.

If you put the $21k in VFIAX(S&P) and pull out at the same time how much would you lose/gain?

BTW, I really liked your posts. I though you had a 6 figure portfolio in the game.

I wish . I believe the XIRR (annualized return) was 65% vs. 15% or so had it been in S&P500 (can’t remember exact numbers) so it was a decent profit.

[butricksaid]

I also exited after jumping on-board August 1st of this year. Good strategy, wrong time.

Made $14k off $100k + $500/wk contributions.

https://imgur.com/a/bCTMUNp

[caklim00]

I'm officially out as well (sort of). I was up about 10% from when I entered in August. I had switched from TMF/UPRO (timint risk parity, timing volatility, and quarterly) to EDV/UPRO to keep management easier.

I decided to put all of the proceeds in SLYV, rebalance in a 401k into international. Also, I say I'm sort of out as I now hold a ZN (10 Year) futures contracts in taxable. I'm basically using it to increase my "bond holdings" a bit without selling any of my existing equity. Right now my goal is to not let futures account for more than half of my bonds since this is still uncharted territory for me.

Holding the futures directly allows me to keep my tilt, as I had considered holding NTSX. Some day I may consider allocation similar to NTSX by holding each of the 5 or 6 futures contracts directly, but thats too much for me at the moment. I want to get through first roll unscathed lol. One thing I've learned about holding these futures is even though they are treasuries (I use IEF to get an idea of how its doing) since there is so much leverage they move more than I orignially anticipated. I started out holding probably too little money (NTSX hold a lot of cash unlike me)