SWAN ETF - 10% Leaps / 90% Treasuries

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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

ChrisBenn wrote: Sat May 30, 2020 1:26 am I think the real potential gotcha is flat or near flat markets. If they don't drop much you don't derive any utility from the call option insurance. If they are flat or don't rise much you are just burning the ER + theta on the options.
Certainly the flatter the market, the worse SWAN does since you keep paying money for theta yet aren't getting any benefits over a 20/80 in participation or a 20/80 in terms of downside protection.

But the question I pose is just how flat that market really needs to be. You call it "flat or near flat". But I think you might find it doesn't have to be that flat really. Even in widely fluctuating markets, a 20/80 might still beat SWAN. And you'd need REALLY big price swings before SWAN actually begins to outperform. So let's quantify that:
In terms of downside protection, a 20/80 has similar amounts. So that takes care of that direction. What about upside? Well, hopefully prioritarian will take the time to answer that for us.

ChrisBenn wrote: Sat May 30, 2020 1:26 am https://stockcharts.com/h-perf/ui?s=SWA ... 4914002297

It has def. performed as expected -- prev 6 months vs vasix (20/80) and vbiax (60/40)
Image
Three things I don't like about this graph is that VASIX has international stocks, it has international bonds and it has corporate bonds. I think this will confound a lot of what we're talking about.

The SWAN bond portion seems to have a duration of about 10 years (correct me if I'm wrong). Let's compare SWAN vs 20% VOO, 55% VGIT and 25% VGLT. That seems to have a similar duration. I admit I don't know how to do it with the website you linked so we can see daily returns but if we just use PV:
https://www.portfoliovisualizer.com/bac ... tion4_2=55

It would appear the simpleton BH portfolio has higher returns, with lower volatility and less downside (in fact, no downside thus far). Of course, this doesn't let us see daily performance but I suspect it's much closer than what you show with VASIX.
"... 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
prioritarian
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by prioritarian »

Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by prioritarian »

Steve Reading wrote: Sat May 30, 2020 8:34 am It would appear the simpleton BH portfolio has higher returns, with lower volatility and less downside (in fact, no downside thus far). Of course, this doesn't let us see daily performance but I suspect it's much closer than what you show with VASIX.
I expect SWAN to perform less robustly than an 80% treasury AA during a bear market because it also contains an equity component. Given that the treasury components of SWAN do not precisely match the vanguard funds, I'm not yet deterred by your chart.

I extended your portfolio comparison to 2019 and added 100% VOO as portfolio 3 and as expected SWAN did indeed capture about 70% of the SPOO.

https://www.portfoliovisualizer.com/bac ... tion4_2=55

Image

Image
Last edited by prioritarian on Sat May 30, 2020 2:48 pm, edited 1 time in total.
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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

prioritarian wrote: Sat May 30, 2020 2:08 pm
Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
Don't you think it would be better to determine it yourself by looking at the underlying positions? It's not even hard, they're just call options 0_o That way instead of "meh I don't really know what this does when stocks go up so I'll just invest in it and see what happens" you could say "stocks need to go up X% for this to actually make any money" without a need to put money on the line.

Just a thought
"... 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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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

prioritarian wrote: Sat May 30, 2020 2:45 pm I expect SWAN to perform less robustly than an 80% treasury AA during a bear market because it also contains an equity component.
I agree with you but not for your reason. A 20/80 portfolio also has an equity component so that's not why SWAN would underperform a 20/80 in a Bear market. It's because most Bear markets aren't drops of more than 50% (which is how much it needs to drop before SWAN begins to outperform) so most Bear markets, SWAN would underperform a simple 20/80.
prioritarian wrote: Sat May 30, 2020 2:45 pm Given that the treasury components of SWAN do not precisely match the vanguard funds, I'm not yet deterred by your chart.
I matched the duration of the bonds and used purely treasuries. Do they perfectly match? No. Is it close enough not to matter? Yep. Certainly much better than a comparison against VASIX, which has international bonds, a shorter duration and corporate bonds.
prioritarian wrote: Sat May 30, 2020 2:45 pm I extended your portfolio comparison to 2019 and added 100% VOO as portfolio 3 and as expected SWAN did indeed capture about 70% of the SPOO.
One problem I have with this comparison is that SWAN gets inflated based on volatility changes, while the other ETFs don't. Volatility is higher now than in beginning of 2019 so that's creating some of the "gains" you think SWAN is getting from SPY participation. I'm assuming we're all investors, not speculators (i.e. you're not looking to sell SWAN when VIX goes up and buy when it goes down, to profit from volatility). So past performance and certainly the test you're setting up, don't say the whole story.

Here's one that does. The Dec call options in SWAN don't even make money until SPY hits 320. Zero. Nada. Only after that does it really offer leveraged participation. If you assume the entire 10% LEAP allocation was in these options, SPY would have to hit 325 by Dec 2020 for it to actually begin to outpace a simple 20/80 portfolio. That's an 11.6% return annual compound return from SPY.

So if you believe the market will produce higher returns than 11.6% annualized, compounded, then finally the SWAN upside participation beats a 20/80. Call it 12% because SWAN fights a hefty ER. From there on, any additional gains on SPY are even better due to leverage.

But if you believe the market will produce a return anywhere between -50% and +12%, then a basic BH 20/80 will be better. If you think it might drop more, or increase more than that, SWAN will outpace on that given year.

Now you can see how your example graph makes SWAN look so good. SPY delivered a bananas-good 16% return. If you think that's normal, then of course, stick to SWAN.
ChrisBenn wrote: Sat May 30, 2020 1:26 am I think the real potential gotcha is flat or near flat markets.
Hopefully the above numbers show that the market doesn't even have to be that flat for SWAN to underperform something simple like a 20/80. I'd claim the opposite: the market actually has to move to large extremes for it to do better than a conservative BH portfolio. At least if you believe volatility will be roughly constant over your holding period.
"... 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
prioritarian
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by prioritarian »

Steve Reading wrote: Sat May 30, 2020 2:47 pm
prioritarian wrote: Sat May 30, 2020 2:08 pm
Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
Don't you think it would be better to determine it yourself by looking at the underlying positions? It's not even hard, they're just call options 0_o That way instead of "meh I don't really know what this does when stocks go up so I'll just invest in it and see what happens" you could say "stocks need to go up X% for this to actually make any money" without a need to put money on the line.

Just a thought
Just want to note that your assumption that I did not look at the underlying option positions is an assumption on your part. As is your assumption that I do not know what a call option is.
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

prioritarian wrote: Sat May 30, 2020 3:50 pm
Steve Reading wrote: Sat May 30, 2020 2:47 pm
prioritarian wrote: Sat May 30, 2020 2:08 pm
Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
Don't you think it would be better to determine it yourself by looking at the underlying positions? It's not even hard, they're just call options 0_o That way instead of "meh I don't really know what this does when stocks go up so I'll just invest in it and see what happens" you could say "stocks need to go up X% for this to actually make any money" without a need to put money on the line.

Just a thought
Just want to note that your assumption that I did not look at the underlying option positions is an assumption on your part. As is your assumption that I do not know what a call option is.
I definitely assumed you looked at the options and know what they are. It’d be a little strange if you bought any options ETF without knowing what they were 0_o

What I am saying (and sticking by) is that I don’t think you did any of the math to understand the upside participation, which is the advantage you claimed it has over a 20/80. Am I wrong?
"... 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
ChrisBenn
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by ChrisBenn »

Steve Reading wrote: Sat May 30, 2020 8:34 am But the question I pose is just how flat that market really needs to be. You call it "flat or near flat". But I think you might find it doesn't have to be that flat really. Even in widely fluctuating markets, a 20/80 might still beat SWAN. And you'd need REALLY big price swings before SWAN actually begins to outperform.
I'd concur that what this cost is probably the key viability question for the fund.
Steve Reading wrote: Sat May 30, 2020 8:34 am Three things I don't like about this graph is that VASIX has international stocks, it has international bonds and it has corporate bonds. I think this will confound a lot of what we're talking about.
(...)
Totally reasonable, and not an intentional pick on my part; I was just trying to find a single fund 20/80. I would agree that a treasury/equity two or three funder is probably the best choice for a benchmark.

I had just compared it for my use to VASIX, and vs. that, well, I wasn't to keen on VASIX for my use case. Your 3 funder example, or maybe govt/itot (i do have a pref for less funds for this use case, and admit there's a bit of irrationality to that) does fare much better.
Steve Reading wrote: Sat May 30, 2020 2:47 pm
prioritarian wrote: Sat May 30, 2020 2:08 pm
Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
Don't you think it would be better to determine it yourself by looking at the underlying positions? It's not even hard, they're just call options 0_o That way instead of "meh I don't really know what this does when stocks go up so I'll just invest in it and see what happens" you could say "stocks need to go up X% for this to actually make any money" without a need to put money on the line.

Just a thought
Not prioritarian, but is it that easy to model the options purchases, roll, etc. going forward? It's pretty straightfoward to look at the existing holdings and figure out the move in the underlying required for positive return ( I just used https://www.optionsprofitcalculator.com ... -call.html, and assume midpoint for costs) -- but I'll confess that modeling it past the first few rolls feels a bit trickier.
  • rebalancing rules holding for 12 months + 1 if it's up at the 6 month point (with the extra theta burn you get as your near the 12 increasing the "cost"). This is great for tax treatment, but actually seems like it might not be the best tradeoff since burning that final 6 months of theta is expensive. If these were 2 year leaps it would be better, but I"m guessing liquidity might be an issue there for a fund.
  • modeling options pricing in the future (or really, option roll costs)
  • modeling periodic contributions would also be annoying, since what your are buying with each contribution changes due to the wide rebalance point
I kinda think this is a complex product, not in execution (pretty straightfoward/rules based to execute; DIY just runs into the issue of option size atomicity), but in modeling/understanding absolute performance. If Taylor wanted to drop his quote about investing in complex products I wouldn't say it wasn't apropos :)

Anyway, thanks for calling out the VASIX vs. treas/broad index difference; obvious in retrospect, but I wasn't considering the impact of VASIX constituent components.
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by prioritarian »

Steve Reading wrote: Sat May 30, 2020 4:23 pm
prioritarian wrote: Sat May 30, 2020 3:50 pm
Steve Reading wrote: Sat May 30, 2020 2:47 pm
prioritarian wrote: Sat May 30, 2020 2:08 pm
Steve Reading wrote: Sat May 30, 2020 7:58 am We'll see if the additional upside participation that you determined above would make up for it.
This is exactly my goal in creating a test position!
Don't you think it would be better to determine it yourself by looking at the underlying positions? It's not even hard, they're just call options 0_o That way instead of "meh I don't really know what this does when stocks go up so I'll just invest in it and see what happens" you could say "stocks need to go up X% for this to actually make any money" without a need to put money on the line.

Just a thought
Just want to note that your assumption that I did not look at the underlying option positions is an assumption on your part. As is your assumption that I do not know what a call option is.
I definitely assumed you looked at the options and know what they are. It’d be a little strange if you bought any options ETF without knowing what they were 0_o

What I am saying (and sticking by) is that I don’t think you did any of the math to understand the upside participation, which is the advantage you claimed it has over a 20/80. Am I wrong?
Yes, I very much understood that this ETF makes a volatility bet and its kind of insulting for you to assume otherwise. I also understand that the June call option is in the money (not that this anecdotal piece of information means anything in terms of modeled index performance.)

You might be interested in this model of 1990-2015 performance of black-swan-type indices versus spy, protective put, CPPI (daily re-balancing), and VBMFX.

Image


The black-swan core index used by the SWAN ETF is based on a 90-10 strategy that replaced VBMFX with 10 year treasuries.

Image


Source:
https://joi.pm-research.com/content/28/1/64
ChrisBenn
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by ChrisBenn »

prioritarian wrote: Sat May 30, 2020 6:24 pm (...)

Source:
https://joi.pm-research.com/content/28/1/64
If only the authors would get with the rest of the world and use arxiv. Can't read the paper unfortunately- so asking some questions:

Did they ever quantify the implicit cost one pays for the leaps in this strategy, historically? I do agree with Steve Reading in that quantifying what one is paying for that insurance would be nice (or at least thats my take on one of his points). The complete theta burn in the case of a gain at 6 months out is what concerns me the most. But thats heuristic; I don't have any quantification for that (other than for the current holdings)
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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

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prioritarian wrote: Sat May 30, 2020 6:24 pm
Yes, I very much understood that this ETF makes a volatility bet and its kind of insulting for you to assume otherwise.
Ok, I didn’t “assume that you didn’t know what options were”. And no, I also didn’t assume “that you don’t know this ETF makes a volatility bet”. I think you might’ve CONFLATED the issue of volatility and returns when you showed your PV graphs and I simply pointed that out and provided a way to separate them. I also think you recognize that mistake and that when you say “SWAN has 70% participation based on this performance”, you understand that a good chunk of SWAN returns were due to volatility, not SPY performance.

This is the second time you’ve mischaracterized me. I think that means I’m saying X and you think I’m saying Y, getting insulted by it even 0_o You honestly seemed to say some interesting things in your last post but why answer? Clearly we’re not quite understanding each other. I’ve been down this road before and we’re not gonna get anywhere evidently.

I wish you good luck with your taxable dry powder allocation of SWAN nonetheless.
"... 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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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

ChrisBenn wrote: Sat May 30, 2020 5:37 pm Totally reasonable, and not an intentional pick on my part; I was just trying to find a single fund 20/80. I would agree that a treasury/equity two or three funder is probably the best choice for a benchmark.

I had just compared it for my use to VASIX, and vs. that, well, I wasn't to keen on VASIX for my use case. Your 3 funder example, or maybe govt/itot (i do have a pref for less funds for this use case, and admit there's a bit of irrationality to that) does fare much better.
Yep, I figured you did it to use that stock market website and see daily performance. Also, for the record, I don't think it's irrational to prefer fewer funds. I think it's undeniable that more funds requires a little more work. Every person will have to figure out how much better additional funds is worth the added complexity. I think it's easier than ever before to use multiple funds but certainly not just as easy IMO as just using one fund.
ChrisBenn wrote: Sat May 30, 2020 5:37 pm Not prioritarian, but is it that easy to model the options purchases, roll, etc. going forward? It's pretty straightfoward to look at the existing holdings and figure out the move in the underlying required for positive return ( I just used https://www.optionsprofitcalculator.com ... -call.html, and assume midpoint for costs) -- but I'll confess that modeling it past the first few rolls feels a bit trickier.
Well, I'm not sure about modeling the product over the future and rolls. For one thing, I don't know exactly what LEAPs they'll choose when they rebalance and that does matter. But I think, to first order, it's good to go through what you show above to understand really what this is getting you. Clearly you've done this and recognize how the market needs to move for this to really be better than a BH portfolio. I think it might have to move quite a bit more than many would realize because people underestimate how much time value these call options have right now.
ChrisBenn wrote: Sat May 30, 2020 5:37 pm
  • rebalancing rules holding for 12 months + 1 if it's up at the 6 month point (with the extra theta burn you get as your near the 12 increasing the "cost"). This is great for tax treatment, but actually seems like it might not be the best tradeoff since burning that final 6 months of theta is expensive. If these were 2 year leaps it would be better, but I"m guessing liquidity might be an issue there for a fund.
  • modeling options pricing in the future (or really, option roll costs)
  • modeling periodic contributions would also be annoying, since what your are buying with each contribution changes due to the wide rebalance point
I kinda think this is a complex product, not in execution (pretty straightfoward/rules based to execute; DIY just runs into the issue of option size atomicity), but in modeling/understanding absolute performance.
I should add, it depends how complex you want to model it. But in general, modeling a strategy of call options plus cash, given some volatility and future SPY return assumptions, isn't really that hard. I probably would make a small Monte Carlos simulator if you really wanted to know what returns or distribution of returns to expect. From some crude math, a straight-forward 20/80 BH portfolio looks more appealing to me so that's probably as far as I would go. If you do take the time to work through that modeling, I'd love to see what you find :)

Cheers mate.
"... 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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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by BJJ_GUY »

Steve Reading wrote: Sat May 30, 2020 8:39 pm
prioritarian wrote: Sat May 30, 2020 6:24 pm
Yes, I very much understood that this ETF makes a volatility bet and its kind of insulting for you to assume otherwise.
Ok, I didn’t “assume that you didn’t know what options were”. And no, I also didn’t assume “that you don’t know this ETF makes a volatility bet”. I think you might’ve CONFLATED the issue of volatility and returns when you showed your PV graphs and I simply pointed that out and provided a way to separate them. I also think you recognize that mistake and that when you say “SWAN has 70% participation based on this performance”, you understand that a good chunk of SWAN returns were due to volatility, not SPY performance.

This is the second time you’ve mischaracterized me. I think that means I’m saying X and you think I’m saying Y, getting insulted by it even 0_o You honestly seemed to say some interesting things in your last post but why answer? Clearly we’re not quite understanding each other. I’ve been down this road before and we’re not gonna get anywhere evidently.

I wish you good luck with your taxable dry powder allocation of SWAN nonetheless.
If they buy .7 delta calls, buy and hold, no delta hedging... then is this really a volatility bet?
ChrisBenn
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by ChrisBenn »

BJJ_GUY wrote: Sat May 30, 2020 9:57 pm
Steve Reading wrote: Sat May 30, 2020 8:39 pm
prioritarian wrote: Sat May 30, 2020 6:24 pm
Yes, I very much understood that this ETF makes a volatility bet and its kind of insulting for you to assume otherwise.
Ok, I didn’t “assume that you didn’t know what options were”. And no, I also didn’t assume “that you don’t know this ETF makes a volatility bet”. I think you might’ve CONFLATED the issue of volatility and returns when you showed your PV graphs and I simply pointed that out and provided a way to separate them. I also think you recognize that mistake and that when you say “SWAN has 70% participation based on this performance”, you understand that a good chunk of SWAN returns were due to volatility, not SPY performance.

This is the second time you’ve mischaracterized me. I think that means I’m saying X and you think I’m saying Y, getting insulted by it even 0_o You honestly seemed to say some interesting things in your last post but why answer? Clearly we’re not quite understanding each other. I’ve been down this road before and we’re not gonna get anywhere evidently.

I wish you good luck with your taxable dry powder allocation of SWAN nonetheless.
If they buy .7 delta calls, buy and hold, no delta hedging... then is this really a volatility bet?
I would say it has volatility exposure; when volatility spikes (due do a drop in the underlying) you aren't going to be at a .7 delta anymore, but closer to atm or otm, so the volatility component if pricing for the option roll will be higher. The impact of that is of course going to depend on how much time is left on the option (at the 6 month till expiration still a decent amount; if it's held for 12 months + 1 day then there isn't much value left anyway, so prob not as significant overall).

So there is absolutely an exposure; I haven't run any numbers to see how significant that exposure is to overall portfolio value.
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by snailderby »

How would I go about calculating the tax cost of holding this in a taxable account? Take any income distributed by the fund and multiply it by my income tax rate and take any capital gains distributions from the fund and multiply it by my LTCG rate? (I'm sorry if that's completely wrong. I've never figured out before how to calculate the tax cost of an ETF. Thanks!)
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Steve Reading
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by Steve Reading »

BJJ_GUY wrote: Sat May 30, 2020 9:57 pm
Steve Reading wrote: Sat May 30, 2020 8:39 pm
prioritarian wrote: Sat May 30, 2020 6:24 pm
Yes, I very much understood that this ETF makes a volatility bet and its kind of insulting for you to assume otherwise.
Ok, I didn’t “assume that you didn’t know what options were”. And no, I also didn’t assume “that you don’t know this ETF makes a volatility bet”. I think you might’ve CONFLATED the issue of volatility and returns when you showed your PV graphs and I simply pointed that out and provided a way to separate them. I also think you recognize that mistake and that when you say “SWAN has 70% participation based on this performance”, you understand that a good chunk of SWAN returns were due to volatility, not SPY performance.

This is the second time you’ve mischaracterized me. I think that means I’m saying X and you think I’m saying Y, getting insulted by it even 0_o You honestly seemed to say some interesting things in your last post but why answer? Clearly we’re not quite understanding each other. I’ve been down this road before and we’re not gonna get anywhere evidently.

I wish you good luck with your taxable dry powder allocation of SWAN nonetheless.
If they buy .7 delta calls, buy and hold, no delta hedging... then is this really a volatility bet?
As long as the volatility is different between the moment you buy and the moment you sell, then volatility will have played a role in your returns. The longer you hold the ETF, the less of an effect volatility will have on returns however.
"... 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
ChrisBenn
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by ChrisBenn »

snailderby wrote: Sun May 31, 2020 7:44 am How would I go about calculating the tax cost of holding this in a taxable account? Take any income distributed by the fund and multiply it by my income tax rate and take any capital gains distributions from the fund and multiply it by my LTCG rate? (I'm sorry if that's completely wrong. I've never figured out before how to calculate the tax cost of an ETF. Thanks!)
If you just want to compare it to other funds you could use fidelity's before/after tax estimates:
https://screener.fidelity.com/ftgw/etf/ ... mbols=SWAN

This is their methodology:
https://www.fidelity.com/webcontent/ap0 ... .shtml#how

Here's VOO for comparison:
https://screener.fidelity.com/ftgw/etf/ ... ymbols=VOO
snailderby
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by snailderby »

ChrisBenn wrote: Sun May 31, 2020 3:08 pm
snailderby wrote: Sun May 31, 2020 7:44 am How would I go about calculating the tax cost of holding this in a taxable account? Take any income distributed by the fund and multiply it by my income tax rate and take any capital gains distributions from the fund and multiply it by my LTCG rate? (I'm sorry if that's completely wrong. I've never figured out before how to calculate the tax cost of an ETF. Thanks!)
If you just want to compare it to other funds you could use fidelity's before/after tax estimates:
https://screener.fidelity.com/ftgw/etf/ ... mbols=SWAN

This is their methodology:
https://www.fidelity.com/webcontent/ap0 ... .shtml#how

Here's VOO for comparison:
https://screener.fidelity.com/ftgw/etf/ ... ymbols=VOO
Thank you! For those of us for whom those assumptions don't hold true (we're not in the highest federal income tax bracket and/or have to pay state income taxes), how do we calculate the tax cost of holding a given ETF in a taxable account?

Morningstar breaks down distributions into three categories: Income, S/T Cap Gain, and L/T Cap Gain. I assume distributions classified as income are taxed at the regular income tax rate. But what about distributions classified as short-term capital gains or long-term capital gains? Would those be taxed at the STCG or LTCG rate? Investopedia says: "Under current IRS regulations, capital gains distributions are taxed as long-term capital gains, no matter how long the individual has owned shares of the fund." Is that true, and does that hold true even for distributions classified as short-term capital gains on Morningstar's website?
guyinlaw
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Re: SWAN ETF - 10% Leaps / 90% Treasuries

Post by guyinlaw »

I am currently holding a bit of SWAN that I purchased for tax loss harvesting swap NTSX.

Its been discussed that cost of theta is high, as they are holding near expiring options. Their current cost for the option roll Dec 20 to Dec 21 is >4.4%. If they had instead held Dec 21 rolled to Dec 22, cost would be ~2.3%.

Is there a reason why they are doing this? I don't see good reason for holding SWAN. (Theta cost + ER)

Code: Select all

Option				 - 	% holding
SPDR S&P CLL OPT 6/21 265	 - 	6.27%
SPDR S&P CLL OPT 12/20 283	 - 	5.84%
Treasuries remaining			
Time is your friend; impulse is your enemy. - John C. Bogle
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