HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by Steve Reading » Sat Jun 06, 2020 7:57 am

GiveTendies wrote:
Sat Jun 06, 2020 12:17 am
Semantics wrote:
Fri Jun 05, 2020 9:33 pm
SPY is 5.5% down from all time highs, and UPRO is 38% down from all time highs
Worth noting that the daily leverage reset is still dramatically better than *no* leverage reset over the past 10 years. https://www.portfoliovisualizer.com/bac ... on3_2=-200 Having your leverage fall too far out of the optimal range is bad.

But resetting the leverage semi-annually or in bands seems to do dramatically better than daily leveraging, assuming PV's "rebalancing" feature is the proper way to model this https://www.portfoliovisualizer.com/bac ... on3_2=-200.

Which makes me fairly tempted to consider using LEAPS to implement this strategy, although it's pretty far out of my comfort zone and searching this thread there aren't really reports of anyone else doing so. Presumably the leverage resets could be combined with rebalancing for tax efficiency, and helped along with incoming funds. One could also hold a layer of ETFs on the top to avoid buying/selling too many LEAPS, and to ease into the system until the LEAPS have been held long-term. It seems like the tax loss would be small relative to the volatility drag.
Note that in your example, you are at 250k at the beginning of 2020. You reset your leverage to 3x, which basically means you loan 500k, invest 750k and let it roll for half a year.

By end of March you're down to 100k equity. You still have a loan of 500k, which means your leverage increased to 6x. (higher at the lows during march but PV doesn't show these)

If the market wouldn't have rebounded and went down another 20% instead, you'd have been wiped out.
Yeah, you probably want to rebalance based on bands, not time periods. Time periods are arbitrary. In some, it's unnecessary to rebalance. In others, you might've wanted to rebalance sooner. But bands ensure you say "Ok, if the market drops less than X%, I'm not going to sell exposure like UPRO does. I will maintain exposure and hope for the rebound. But if it breaks Y% drop, I will suck it up and sell exposure and decrease my leverage".

There will be some times when rebalancing less frequently backfires. And you do end up selling exposure lower in the market. And UPRO would've been better since it decreased exposure throughout the drop. But it should, hopefully, be made up by all of the times when the market just moves a bit (say 5-10% up and down), where UPRO buys high/sells low but rebalancing a little less frequently hopefully just skips them altogether.

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

Post by jolmscheid » Sat Jun 06, 2020 8:13 am

Steve Reading wrote:
Sat Jun 06, 2020 7:57 am
GiveTendies wrote:
Sat Jun 06, 2020 12:17 am
Semantics wrote:
Fri Jun 05, 2020 9:33 pm
SPY is 5.5% down from all time highs, and UPRO is 38% down from all time highs
Worth noting that the daily leverage reset is still dramatically better than *no* leverage reset over the past 10 years. https://www.portfoliovisualizer.com/bac ... on3_2=-200 Having your leverage fall too far out of the optimal range is bad.

But resetting the leverage semi-annually or in bands seems to do dramatically better than daily leveraging, assuming PV's "rebalancing" feature is the proper way to model this https://www.portfoliovisualizer.com/bac ... on3_2=-200.

Which makes me fairly tempted to consider using LEAPS to implement this strategy, although it's pretty far out of my comfort zone and searching this thread there aren't really reports of anyone else doing so. Presumably the leverage resets could be combined with rebalancing for tax efficiency, and helped along with incoming funds. One could also hold a layer of ETFs on the top to avoid buying/selling too many LEAPS, and to ease into the system until the LEAPS have been held long-term. It seems like the tax loss would be small relative to the volatility drag.
Note that in your example, you are at 250k at the beginning of 2020. You reset your leverage to 3x, which basically means you loan 500k, invest 750k and let it roll for half a year.

By end of March you're down to 100k equity. You still have a loan of 500k, which means your leverage increased to 6x. (higher at the lows during march but PV doesn't show these)

If the market wouldn't have rebounded and went down another 20% instead, you'd have been wiped out.
Yeah, you probably want to rebalance based on bands, not time periods. Time periods are arbitrary. In some, it's unnecessary to rebalance. In others, you might've wanted to rebalance sooner. But bands ensure you say "Ok, if the market drops less than X%, I'm not going to sell exposure like UPRO does. I will maintain exposure and hope for the rebound. But if it breaks Y% drop, I will suck it up and sell exposure and decrease my leverage".

There will be some times when rebalancing less frequently backfires. And you do end up selling exposure lower in the market. And UPRO would've been better since it decreased exposure throughout the drop. But it should, hopefully, be made up by all of the times when the market just moves a bit (say 5-10% up and down), where UPRO buys high/sells low but rebalancing a little less frequently hopefully just skips them altogether.
Didn't this thread already look at re-balancing results of bands vs monthly etc and arrived that quarterly was the best, based on the past?

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

Post by inquirering » Sat Jun 06, 2020 8:18 am

typical.investor wrote:
Fri Jun 05, 2020 10:59 pm
PV doesn't test daily rebalancing. At most you can select monthly.
You can do weekly at PV. (which is more often than monthly)

Also, you could theoretically do "at signal" which would be anytime the signal you set presents itself.

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

Post by typical.investor » Sat Jun 06, 2020 8:21 am

inquirering wrote:
Sat Jun 06, 2020 8:18 am
typical.investor wrote:
Fri Jun 05, 2020 10:59 pm
PV doesn't test daily rebalancing. At most you can select monthly.
You can do weekly at PV. (which is more often than monthly)

Also, you could theoretically do "at signal" which would be anytime the signal you set presents itself.
Are we talking Portfolio Visualizer here?

If so, I see monthly as the most frequent rebalancing option. I don’t see weekly.

And choosing a narrow band which I think you might be calling “at signal”, only rebalances once a month at most. You can see the rebalance dates.

Is weekly perhaps available if you subscribe?

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

Post by Steve Reading » Sat Jun 06, 2020 9:06 am

jolmscheid wrote:
Sat Jun 06, 2020 8:13 am
Steve Reading wrote:
Sat Jun 06, 2020 7:57 am
GiveTendies wrote:
Sat Jun 06, 2020 12:17 am
Semantics wrote:
Fri Jun 05, 2020 9:33 pm
SPY is 5.5% down from all time highs, and UPRO is 38% down from all time highs
Worth noting that the daily leverage reset is still dramatically better than *no* leverage reset over the past 10 years. https://www.portfoliovisualizer.com/bac ... on3_2=-200 Having your leverage fall too far out of the optimal range is bad.

But resetting the leverage semi-annually or in bands seems to do dramatically better than daily leveraging, assuming PV's "rebalancing" feature is the proper way to model this https://www.portfoliovisualizer.com/bac ... on3_2=-200.

Which makes me fairly tempted to consider using LEAPS to implement this strategy, although it's pretty far out of my comfort zone and searching this thread there aren't really reports of anyone else doing so. Presumably the leverage resets could be combined with rebalancing for tax efficiency, and helped along with incoming funds. One could also hold a layer of ETFs on the top to avoid buying/selling too many LEAPS, and to ease into the system until the LEAPS have been held long-term. It seems like the tax loss would be small relative to the volatility drag.
Note that in your example, you are at 250k at the beginning of 2020. You reset your leverage to 3x, which basically means you loan 500k, invest 750k and let it roll for half a year.

By end of March you're down to 100k equity. You still have a loan of 500k, which means your leverage increased to 6x. (higher at the lows during march but PV doesn't show these)

If the market wouldn't have rebounded and went down another 20% instead, you'd have been wiped out.
Yeah, you probably want to rebalance based on bands, not time periods. Time periods are arbitrary. In some, it's unnecessary to rebalance. In others, you might've wanted to rebalance sooner. But bands ensure you say "Ok, if the market drops less than X%, I'm not going to sell exposure like UPRO does. I will maintain exposure and hope for the rebound. But if it breaks Y% drop, I will suck it up and sell exposure and decrease my leverage".

There will be some times when rebalancing less frequently backfires. And you do end up selling exposure lower in the market. And UPRO would've been better since it decreased exposure throughout the drop. But it should, hopefully, be made up by all of the times when the market just moves a bit (say 5-10% up and down), where UPRO buys high/sells low but rebalancing a little less frequently hopefully just skips them altogether.
Didn't this thread already look at re-balancing results of bands vs monthly etc and arrived that quarterly was the best, based on the past?
I thought the thread had looked at rebalancing frequency of the UPRO/TMF portfolio. I didn’t realize it had looked at rebalancing frequency of the leverage of the portfolio (whether daily, like UPRO/TMF portfolio vs monthly with options/futures/margin/etc).

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

Post by Lee_WSP » Sat Jun 06, 2020 10:08 am

Your use of words could have been a bit clearer.

Instead of 3x leverage, you could say borrow/invest 3x of the base amount and let it ride.

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

Post by Lee_WSP » Sat Jun 06, 2020 11:28 am

Steve Reading wrote:
Fri Jun 05, 2020 11:44 pm

If you set 3x leverage and never touch it again, over time, you will end up with less and less leverage since your equity increases (market tends to go up). Its results begin to resemble just VFINX itself. So 3x VFINX - 2X CASH, never rebalanced, will almost certainly underperform any rebalanced, leveraged strategy given a long-enough period of time. That's why it underperforms 3X VFINX - 2X CASH if rebalanced (hopefully that answers your question).
The more i thought about it, the less this statement
makes sense. If you have 3x leverage at the beginning, you have 3x of a head start. The unlevered portfolio will never catch up unless the leverage goes bust.

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

Post by Steve Reading » Sat Jun 06, 2020 11:46 am

Lee_WSP wrote:
Sat Jun 06, 2020 11:28 am
Steve Reading wrote:
Fri Jun 05, 2020 11:44 pm

If you set 3x leverage and never touch it again, over time, you will end up with less and less leverage since your equity increases (market tends to go up). Its results begin to resemble just VFINX itself. So 3x VFINX - 2X CASH, never rebalanced, will almost certainly underperform any rebalanced, leveraged strategy given a long-enough period of time. That's why it underperforms 3X VFINX - 2X CASH if rebalanced (hopefully that answers your question).
The more i thought about it, the less this statement
makes sense. If you have 3x leverage at the beginning, you have 3x of a head start. The unlevered portfolio will never catch up unless the leverage goes bust.
You're right, it won't catch up. I didn't mean to say it would catch up. I meant to say that the returns over time will slowly get closer to VFINX. Take a look at:
https://www.portfoliovisualizer.com/bac ... on2_1=-200

On 1985, the returns of portfolio 1 are about 2.5 times as high (76% vs 31%). But by 2013 and onwards, they're pretty close (off by like a % more or less). So I'll be more specific:
"The yearly returns of an unrebalanced x3 VFINX -2x CASHX will approach the returns of x1 VFINX as time goes by. Their yearly CAGR will be equal when t = infinity"

The final sum will almost surely be bigger for the former due to the headstart, but given enough time, the leverage just isn't kicking in any more.

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

Post by inquirering » Sat Jun 06, 2020 12:09 pm

typical.investor wrote:
Sat Jun 06, 2020 8:21 am
inquirering wrote:
Sat Jun 06, 2020 8:18 am
typical.investor wrote:
Fri Jun 05, 2020 10:59 pm
PV doesn't test daily rebalancing. At most you can select monthly.
You can do weekly at PV. (which is more often than monthly)

Also, you could theoretically do "at signal" which would be anytime the signal you set presents itself.
Are we talking Portfolio Visualizer here?

If so, I see monthly as the most frequent rebalancing option. I don’t see weekly.

And choosing a narrow band which I think you might be calling “at signal”, only rebalances once a month at most. You can see the rebalance dates.

Is weekly perhaps available if you subscribe?
It is available for everyone (subscribers and non-subscribers). I think I was talking about the asset allocation models on PV though and that is a different screen.

See screenshot (available options are "At Signal", "Weekly", "Monthly", "Bi-Monthly", and "Quarterly" in drop-down menu):


Image

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

Post by Lee_WSP » Sat Jun 06, 2020 1:38 pm

Steve Reading wrote:
Sat Jun 06, 2020 11:46 am
Lee_WSP wrote:
Sat Jun 06, 2020 11:28 am
Steve Reading wrote:
Fri Jun 05, 2020 11:44 pm

If you set 3x leverage and never touch it again, over time, you will end up with less and less leverage since your equity increases (market tends to go up). Its results begin to resemble just VFINX itself. So 3x VFINX - 2X CASH, never rebalanced, will almost certainly underperform any rebalanced, leveraged strategy given a long-enough period of time. That's why it underperforms 3X VFINX - 2X CASH if rebalanced (hopefully that answers your question).
The more i thought about it, the less this statement
makes sense. If you have 3x leverage at the beginning, you have 3x of a head start. The unlevered portfolio will never catch up unless the leverage goes bust.
You're right, it won't catch up. I didn't mean to say it would catch up. I meant to say that the returns over time will slowly get closer to VFINX. Take a look at:
https://www.portfoliovisualizer.com/bac ... on2_1=-200

On 1985, the returns of portfolio 1 are about 2.5 times as high (76% vs 31%). But by 2013 and onwards, they're pretty close (off by like a % more or less). So I'll be more specific:
"The yearly returns of an unrebalanced x3 VFINX -2x CASHX will approach the returns of x1 VFINX as time goes by. Their yearly CAGR will be equal when t = infinity"

The final sum will almost surely be bigger for the former due to the headstart, but given enough time, the leverage just isn't kicking in any more.
Thats what I thought you meant at first.

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

Post by oracle101 » Sun Jun 07, 2020 12:21 pm

privatefarmer wrote:
Mon Jun 01, 2020 12:24 am
irresponsible? thats a loaded question. i'm sure most on this forum would say yes but this is a relatively conservative, mainstream investment forum. is it irresponsible for someone to put all their wealth into their small business? or is it irresponsible for someone to use leverage to obtain a bunch of rental properties? I think, in comparison to those examples, this is a relatively "tame" strategy.

I am in my late 30s, wife and I have close to $1mil in this strategy which is our entire investable net worth. I use a variant of HFs strategy and incorporate leveraged REITs as well. but I look at TMF/UPRO as essentially very volatile ETFs that still track an overall index. They will not go to zero but they certainly will go through major drawdowns. IF you can stomach the 60-70% drawdowns that I would expect to see at the worst of times and you can ride it out then I don't see why this strategy is so much more risky than being 100% equities. everyone here freaks out over the starting yield of treasuries which i think is totally missing the point of risk parity. many are concerned about stagflation which is always a possibility but (hopefully) your employment income, your future social security/pensions, your home, and your holdings in stocks will work as an adequate hedge against inflation. i have tinkered with including gold into this strategy but, unfortunately, UGLD does not seem to track as well as the other LETFs and it acts as a hindrance to the overall CAGR while increasing volatility.

so, no, if you think you can stomach the volatility then I don't think this is irresponsible. if you were worth millions and had "won the game" then I don't see why you shouldn't take a large chunk and put it in something safer/more conservative. but in your 40s, understanding the risks, I dont see how this is any more irresponsible than taking out a bunch of mortgages on rental properties or putting everything you have into a small business.

you also have to remember that many on here will continually point out the potential pit falls of this strategy. however, even if this does not get a 20% CAGR going forward, maybe it will get 15%. Or maybe it will get 10%. what are you risking really? what are you giving up? the opportunity to (hopefully) make 10% in the stock market? it would take a MAJOR under performance going forward for this strategy to not outperform 100% equities. we have 30+ years of this strategy making somewhere int he realm of 20% CAGR and it still is not enough for many people to put more than 5-10% of their portfolio into it...
What leveraged REITs do you use? Do you have a portfolio viz link or backtested data you can share?

Curious how this will affect performance

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

Post by privatefarmer » Sun Jun 07, 2020 1:48 pm

I use DRN. It’s only been around for a few years. But if you add FRESX (unleveraged REITs) to your strategy you can backtest all
The way to the 80s. I’ve found that REITs have generally increased CAGR without increasing max DD in a significant way.

oracle101
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by oracle101 » Sun Jun 07, 2020 1:51 pm

privatefarmer wrote:
Sun Jun 07, 2020 1:48 pm
I use DRN. It’s only been around for a few years. But if you add FRESX (unleveraged REITs) to your strategy you can backtest all
The way to the 80s. I’ve found that REITs have generally increased CAGR without increasing max DD in a significant way.
What allocation are you using for:
UPRO
TMF
FRESX

I am surprised that levered gold doesn't work better than REITs, since REITs are a part of UPRO

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

Post by privatefarmer » Sun Jun 07, 2020 2:08 pm

So I use the adaptive allocation model which has me adjust the allocations to each monthly. I’ve looked at UGLD but it seems to suffer greatly from volatility drag and it’s an ETN which have other potential problems.

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

Post by nolegs » Sun Jun 07, 2020 10:11 pm

With IBKR Pro's low margin rates (1.55% - 0.85% depending on margin balance), I've been thinking of moving a portion of my taxable account over there and using margin with this strategy. I understand this strategy already utilizes leverage which will make for larger fluctuations and potential losses. I also understand that if there is a margin call, they could liquidate part or all of my holdings to cover the loan.

I've still got plenty of prime earning years ahead of me (40's), separate tax-advantaged retirement funds, and real estate, and I strongly expect that the market will outperform the 1.5% margin loan. Even though IBKR lets you leverage up to 5-6x your actual holdings (ie. buy $600k in stock with $100k cash), I would probably only apply an additional 25% in margin. (ie. buy $125k in stock with $100k cash).

A related thought is to hold a higher weighting of TMF in the IBKR account to decrease the likelihood of a margin call since it's less likely to decline 90% (or whatever the decline would have to be to trigger a margin call on a 20-30% margin loan), then in my other non-IBKR, non-margin, taxable account, hold a larger proportion of UPRO so it still balances out to my desired ratio (60/40 UPRO/TMF).

Since UPRO is already 3x levered, and the management fee is around 1%, isn't this close to just applying another X of leverage at an additional 1.5% on the additional X'd leverage?

Mathematically, if I were to put $100k in and take an additional $100k in margin, would that be equivalent to a 6x lever'd portfolio with a 1.75% 'management fee' (1% on the full $200k UPRO/TMF portfolio and then 1.55% additional on the $100k margin)?

Crazy talk or not?

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

Post by inquirering » Mon Jun 08, 2020 9:15 am

Would it be logical to short the negative 3x version of some of these ETFs?

For instance, TMV goes down faster than TMF goes up, SDOW goes down faster than UDOW goes up, SQQQ goes down faster than TQQQ goes up, etc. (same with all of the -3x ETFs)

You can go look at the 3, 5, 10, etc. year returns for each and the short has a higher negative return than the other has positive return. Just wondering if it would be smart to short the negative instead of buy the positive?

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

Post by Lee_WSP » Mon Jun 08, 2020 10:21 am

inquirering wrote:
Mon Jun 08, 2020 9:15 am
Would it be logical to short the negative 3x version of some of these ETFs?
Yes, but you could only do that in taxable margin accounts.

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

Post by LittleBitMore » Mon Jun 08, 2020 10:39 am

inquirering wrote:
Mon Jun 08, 2020 9:15 am
Would it be logical to short the negative 3x version of some of these ETFs?

For instance, TMV goes down faster than TMF goes up, SDOW goes down faster than UDOW goes up, SQQQ goes down faster than TQQQ goes up, etc. (same with all of the -3x ETFs)

You can go look at the 3, 5, 10, etc. year returns for each and the short has a higher negative return than the other has positive return. Just wondering if it would be smart to short the negative instead of buy the positive?
In theory yes but in practice, probably not. You need to deal with the cost of borrowing, availability issues, margin calls. I.e. the effort is significantly increased which defeats part of the purpose of this portfolio

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

Post by fatcoffeedrinker » Mon Jun 08, 2020 1:31 pm

I officially hit 100% return today, doubling my initial $100K since 2/20/19. Thanks HEDGEFUNDIE and all other that contributed to this thread!

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

Post by ChrisBenn » Mon Jun 08, 2020 2:54 pm

inquirering wrote:
Mon Jun 08, 2020 9:15 am
Would it be logical to short the negative 3x version of some of these ETFs?

For instance, TMV goes down faster than TMF goes up, SDOW goes down faster than UDOW goes up, SQQQ goes down faster than TQQQ goes up, etc. (same with all of the -3x ETFs)

You can go look at the 3, 5, 10, etc. year returns for each and the short has a higher negative return than the other has positive return. Just wondering if it would be smart to short the negative instead of buy the positive?
Looks like recently the borrow fees on TMV have been close to 10%
https://iborrowdesk.com/report/TMV
I'd imagine it's on the hard to borrow list.
(assuming that site is accurate)

SQQQ is ~1%, which is less crazy (TMV is just very low volume)
https://iborrowdesk.com/report/SQQQ

The arbitrage play is to short both pairs (TQQQ/SQQQ) and collect volatility decay/fees/etc. The question is that going to be more than the ~1.4% borrow cost (TQQQ is about 1.7). The other gotcha is that borrow fees can change at any time.
(borrow cost for tqqq/sqqq is actually lower than I expected - UPRO is ~2.9%. which is more what I expected)

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

Post by corp_sharecropper » Mon Jun 08, 2020 3:38 pm

nolegs wrote:
Sun Jun 07, 2020 10:11 pm
With IBKR Pro's low margin rates (1.55% - 0.85% depending on margin balance), I've been thinking of moving a portion of my taxable account over there and using margin with this strategy. I understand this strategy already utilizes leverage which will make for larger fluctuations and potential losses. I also understand that if there is a margin call, they could liquidate part or all of my holdings to cover the loan.

I've still got plenty of prime earning years ahead of me (40's), separate tax-advantaged retirement funds, and real estate, and I strongly expect that the market will outperform the 1.5% margin loan. Even though IBKR lets you leverage up to 5-6x your actual holdings (ie. buy $600k in stock with $100k cash), I would probably only apply an additional 25% in margin. (ie. buy $125k in stock with $100k cash).

A related thought is to hold a higher weighting of TMF in the IBKR account to decrease the likelihood of a margin call since it's less likely to decline 90% (or whatever the decline would have to be to trigger a margin call on a 20-30% margin loan), then in my other non-IBKR, non-margin, taxable account, hold a larger proportion of UPRO so it still balances out to my desired ratio (60/40 UPRO/TMF).

Since UPRO is already 3x levered, and the management fee is around 1%, isn't this close to just applying another X of leverage at an additional 1.5% on the additional X'd leverage?

Mathematically, if I were to put $100k in and take an additional $100k in margin, would that be equivalent to a 6x lever'd portfolio with a 1.75% 'management fee' (1% on the full $200k UPRO/TMF portfolio and then 1.55% additional on the $100k margin)?

Crazy talk or not?

I'm 99% sure you will be unable to leverage any of these ETFs anywhere close to the amount you could a "normal" ETF. My guess is the maintenance margin level will be 70-80% and NOT 25-30% like it might for something like SPY. Just be aware of that going into this. Personally, I think you're nearly guaranteed to blow up if you keep near max allowable margin for a long enough time on these ETFs. You might be better off using call options than buying things like UPRO on margin, at least you won't have a callable loan (and IB will absolutely automatically liquidate your positions if necessary, there won't be a "margin call" to request you add more cash, it will be nearly instant).

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

Post by privatefarmer » Mon Jun 08, 2020 3:53 pm

Yeah I use reg T margin at IB and they require you to own 75% of total position. In other words you can borrow $25 for every $75 invested without hitting margin call. So not a lot. I borrow 10% of my account value which would allow it to fall up to 60% without hitting a margin call.

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

Post by wackerdr » Mon Jun 08, 2020 4:02 pm

been reading this entire thread and few other papers on leveraged ETF. Thank you HedgeFundie and others who weighed in. I am convinced with the theories and backtest. I finally put in 145K , comes to 10% of portfolio in this strategy in IRA- with 70% TQQQ and 30% TMF. I plan to do quarterly rebalancing. I can afford to lose this, but obviously love the upside that could come. I am 47 and looking at 12 - 15 year horizon.

I am not going to do SMA based pull out, but put a contingent order to sell if the price drops 40%. if( more like when) that happens, I will evaluate if I need to exit for a period, before I get back in.

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

Post by GiveTendies » Mon Jun 08, 2020 8:58 pm

nolegs wrote:
Sun Jun 07, 2020 10:11 pm
Mathematically, if I were to put $100k in and take an additional $100k in margin, would that be equivalent to a 6x lever'd portfolio with a 1.75% 'management fee' (1% on the full $200k UPRO/TMF portfolio and then 1.55% additional on the $100k margin)?

Crazy talk or not?
Please don't do this. The leverage you're proposing is too high for "buy and forget".

Besides, IBKR has higher margin requirements for leveraged ETFs (which makes sense). I think the theoretical maximum at IBKR you could achieve this way is 4x but then you're at a margin call with every down movement.


You should set your leverage (1.5x / 2x / 3x / whatever) and then decide how to do it. For example with:
- Levered Index ETFs
- Index ETFs on IBKR margin
- Options on Index ETFs
- Index Futures
- ...

All of those have pro's and con's, most of which were discussed by Hedgefundie.
Does it make sense to do this journey with SPY+TLT on IBKR margin instead of levered ETFs? Absolutely, but it will be a lot more manual work. And better results than levered ETFs is still not guaranteed because you are borrowing (from IBKR) at LIBOR + 1.5% whereas the levered ETFs will effectively borrow anywhere from LIBOR - 0.1% to LIBOR + 0.2%.

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

Post by MindTheGAAP » Mon Jun 08, 2020 11:23 pm

fatcoffeedrinker wrote:
Mon Jun 08, 2020 1:31 pm
I officially hit 100% return today, doubling my initial $100K since 2/20/19. Thanks HEDGEFUNDIE and all other that contributed to this thread!
Incredible. I’m at an ATH in my RIRA thanks to this but I don’t believe I’ve doubled. I also didn’t enter until June of 2019 but believe to be up around 35-40% over this time period. Certainly nothing to sniff at all things considered.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

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

Post by rascott » Tue Jun 09, 2020 8:43 am

Rolled my Treasury futures + micro emini contracts yesterday for the 3rd time.

I'm targeting 3x leverage....50/50 split of SP500 and Treasury futures with equivalent duration exposure as TMF.

Up 41% since started in Sept.

Also have been buying more PSLDX and PSPTX recently.

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

Post by zdzdbets » Tue Jun 09, 2020 10:28 am

Would you guys lever treasuries to 5X if using futures?


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

Post by Mickelous » Tue Jun 09, 2020 3:01 pm

HedgeFundMillionaire wrote:
Tue Jun 09, 2020 10:53 am
What are your thoughts on this?

https://seekingalpha.com/article/435280 ... ebalancing
I don't think the tracking error is the only thing responsible, as holding a single etf fund you will get hit hard with decay and volility. This doesn't poke holes in risk parity leverage IMO.

keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 » Tue Jun 09, 2020 4:29 pm

zdzdbets wrote:
Tue Jun 09, 2020 10:28 am
Would you guys lever treasuries to 5X if using futures?
For TYU20 - U.S. 10-Yr. Notes SEP 2020, you need margin requirement of $2775. The notional is $100k. Thats like ~36x. Someone who knows futures can correct me.

keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 » Tue Jun 09, 2020 4:32 pm

rascott wrote:
Tue Jun 09, 2020 8:43 am
Rolled my Treasury futures + micro emini contracts yesterday for the 3rd time.

I'm targeting 3x leverage....50/50 split of SP500 and Treasury futures with equivalent duration exposure as TMF.

Up 41% since started in Sept.

Also have been buying more PSLDX and PSPTX recently.
Thanks for the update.
I wish there was a "Emini" version of Treasuries. If you don't mind me asking what contracts do you use for treasuries?
Last edited by keith6014 on Tue Jun 09, 2020 4:50 pm, edited 1 time in total.

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

Post by Steve Reading » Tue Jun 09, 2020 4:47 pm

Mickelous wrote:
Tue Jun 09, 2020 3:01 pm
HedgeFundMillionaire wrote:
Tue Jun 09, 2020 10:53 am
What are your thoughts on this?

https://seekingalpha.com/article/435280 ... ebalancing
I don't think the tracking error is the only thing responsible, as holding a single etf fund you will get hit hard with decay and volility. This doesn't poke holes in risk parity leverage IMO.
I think it might poke some holes at risk parity leverage implemented with LETFs as opposed to implemented with futures contracts.

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

Post by rascott » Tue Jun 09, 2020 6:00 pm

keith6014 wrote:
Tue Jun 09, 2020 4:32 pm
rascott wrote:
Tue Jun 09, 2020 8:43 am
Rolled my Treasury futures + micro emini contracts yesterday for the 3rd time.

I'm targeting 3x leverage....50/50 split of SP500 and Treasury futures with equivalent duration exposure as TMF.

Up 41% since started in Sept.

Also have been buying more PSLDX and PSPTX recently.
Thanks for the update.
I wish there was a "Emini" version of Treasuries. If you don't mind me asking what contracts do you use for treasuries?
I've been varying it based upon what contacts I need to hit my target duration. Started out using all 2 year. Then went 2 yr plus Ultra 10s. Now have 2/10/30.

Much depends upon the size of the account of which you might need to use.

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

Post by Mickelous » Tue Jun 09, 2020 7:29 pm

Steve Reading wrote:
Tue Jun 09, 2020 4:47 pm
Mickelous wrote:
Tue Jun 09, 2020 3:01 pm
HedgeFundMillionaire wrote:
Tue Jun 09, 2020 10:53 am
What are your thoughts on this?

https://seekingalpha.com/article/435280 ... ebalancing
I don't think the tracking error is the only thing responsible, as holding a single etf fund you will get hit hard with decay and volility. This doesn't poke holes in risk parity leverage IMO.
I think it might poke some holes at risk parity leverage implemented with LETFs as opposed to implemented with futures contracts.
Not so sure a lot of LETF hate seems to be one big misunderstanding, for instance volatility decay, the US stock market is flat myth. goes up 1%, goes down 1% over and over again you lose. If the stock market is doing that permanently I've already lost with equities either way. If the only way to win is for things to keep going up over time, then it makes sense to use a reasonable amount of leverage to get there faster.

I'm weighed my emotional risk and leveraged all weather looked fairly reasonable. What really convinced me to use 5-6 different LETFs is that looking at the returns over time there was a high year to year variance in the annual return, which to me indicates that I will be doing a lot of buying low and selling high on a year to year basis.

If you're curious I used
UTSL
DRN
UGLD
TQQQ
UPRO
TMF

20% of it mixed between the top 3, 10% tqqq 30% upro and 40% TMF. It's really a thing of beauty to watch the backtest line graph of year to year returns, how they all mostly weave up and down against eachother. Every year one of these 6 seems to really out perform and one seems to not do so great, and I feel well diversified emotionally enough to justify the risk taken.

Before this I was going to invest my savings in more rental properties but this seems like the better leveraged bet.

keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 » Tue Jun 09, 2020 8:02 pm

rascott wrote:
Tue Jun 09, 2020 6:00 pm
keith6014 wrote:
Tue Jun 09, 2020 4:32 pm
rascott wrote:
Tue Jun 09, 2020 8:43 am
Rolled my Treasury futures + micro emini contracts yesterday for the 3rd time.

I'm targeting 3x leverage....50/50 split of SP500 and Treasury futures with equivalent duration exposure as TMF.

Up 41% since started in Sept.

Also have been buying more PSLDX and PSPTX recently.
Thanks for the update.
I wish there was a "Emini" version of Treasuries. If you don't mind me asking what contracts do you use for treasuries?
I've been varying it based upon what contacts I need to hit my target duration. Started out using all 2 year. Then went 2 yr plus Ultra 10s. Now have 2/10/30.

Much depends upon the size of the account of which you might need to use.
Your account is much larger than mine. If you hold these 3 contracts, your notional is close to $300k for bonds and you mentioned 50:50. So you are close to $600k.

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

Post by rascott » Tue Jun 09, 2020 8:16 pm

keith6014 wrote:
Tue Jun 09, 2020 8:02 pm
rascott wrote:
Tue Jun 09, 2020 6:00 pm
keith6014 wrote:
Tue Jun 09, 2020 4:32 pm
rascott wrote:
Tue Jun 09, 2020 8:43 am
Rolled my Treasury futures + micro emini contracts yesterday for the 3rd time.

I'm targeting 3x leverage....50/50 split of SP500 and Treasury futures with equivalent duration exposure as TMF.

Up 41% since started in Sept.

Also have been buying more PSLDX and PSPTX recently.
Thanks for the update.
I wish there was a "Emini" version of Treasuries. If you don't mind me asking what contracts do you use for treasuries?
I've been varying it based upon what contacts I need to hit my target duration. Started out using all 2 year. Then went 2 yr plus Ultra 10s. Now have 2/10/30.

Much depends upon the size of the account of which you might need to use.
Your account is much larger than mine. If you hold these 3 contracts, your notional is close to $300k for bonds and you mentioned 50:50. So you are close to $600k.

Not really the way I look at it. The total equity in the account is roughly $140k.

$70k equity....3x leveraged. So $210k equity exposure. Mainly holding VOO + micro eminis

$70k long duration (roughly 18.5 duration ) 3x leveraged. That's a little tricky to get right. I want something that's similar to $70k in TMF. You can either buy a lot of short term (2 yr).. maybe one Ultra 30 year..... or some combo of contracts throughout the yield curve. For this quarter that came to be one 2yr, one 10 yr and one 30 yr.

Yes that's actually roughly $400k in notional bond exposure (the 2 year is $200k)..... but the duration of the combo is similar to $70k in TMF.

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

Post by Steve Reading » Tue Jun 09, 2020 9:18 pm

Mickelous wrote:
Tue Jun 09, 2020 7:29 pm
Steve Reading wrote:
Tue Jun 09, 2020 4:47 pm
Mickelous wrote:
Tue Jun 09, 2020 3:01 pm
HedgeFundMillionaire wrote:
Tue Jun 09, 2020 10:53 am
What are your thoughts on this?

https://seekingalpha.com/article/435280 ... ebalancing
I don't think the tracking error is the only thing responsible, as holding a single etf fund you will get hit hard with decay and volility. This doesn't poke holes in risk parity leverage IMO.
I think it might poke some holes at risk parity leverage implemented with LETFs as opposed to implemented with futures contracts.
Not so sure a lot of LETF hate seems to be one big misunderstanding, for instance volatility decay, the US stock market is flat myth. goes up 1%, goes down 1% over and over again you lose.
Perhaps a lot of LETF hate are misunderstandings of those items you mention but the LETF hate that HedgeFundMillionaire is linking to above is clearly not about any of those. It is about the fact that, in the author's experience, trading desks exploit LETF rigid rebalancing to front-load them. And hence, if you want to invest with leverage, to select products that don't have that rigid EOD rebalancing characteristic to exploit.

It is anecdotal however since the tracking error he shows, as you point out, isn't actually showing the magnitude of the front loading. But I can believe it occurs.

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

Post by GiveTendies » Tue Jun 09, 2020 10:50 pm

rascott wrote:
Tue Jun 09, 2020 8:16 pm
Not really the way I look at it. The total equity in the account is roughly $140k.

$70k equity....3x leveraged. So $210k equity exposure. Mainly holding VOO + micro eminis

$70k long duration (roughly 18.5 duration ) 3x leveraged. That's a little tricky to get right. I want something that's similar to $70k in TMF. You can either buy a lot of short term (2 yr).. maybe one Ultra 30 year..... or some combo of contracts throughout the yield curve. For this quarter that came to be one 2yr, one 10 yr and one 30 yr.

Yes that's actually roughly $400k in notional bond exposure (the 2 year is $200k)..... but the duration of the combo is similar to $70k in TMF.

Just calculated this through because I think it is a very smart form of implementation!

Using 1 ZT + 1 ZN + 1 ZB you are sitting at ~530k notional bonds amount with a weighted, adj duration of 6.45 years

This equates to 70k with a duration of 49 years. Unfortunately, Direxion has removed their adj duration on the TMF website (i swear i saw it a few weeks ago) but using 3x TLT from iShares website, we can approximate 3*18.8 = 56.4y duration for TMF.

So you are a little under TMF's exposure but not by much. Using 2 ZT instead would move your duration to 55y and 3 ZT to 61.3y.


I'm curious how you manage your margin/cash in your account? Do you just sit on the remaining cash or do you hold some money-fund like ETF?

Upupandaway7
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Upupandaway7 » Wed Jun 10, 2020 3:09 am

HEDGEFUNDIE wrote:
Thu Apr 16, 2020 11:55 am
BV3273 wrote:
Thu Apr 16, 2020 10:46 am
I wonder when the OP will update the graph on the first page again.
I wonder how many people are sitting on the edge of their seats waiting for that graph to update.
Big fan---amazing analysis and follow throughs---am new here to bogleheads and your thread and have read 100s of your posts tonight. But am not new to investing and have been picking value stocks /some momentum and a light investor for last 5 years...
Once again-thanks for the transparency and showing the latest portfolio after Marc 23 crash to be clear.
Couple of questions for you post Covid scenarios
1) upro/tqqq are still trading at discounts to pre-march 23 levels- does this matter ? As a value investor, if X is trading at X/2 with a potential to go back to X --- always exciting to get in. UPRO high this year was @ 80.36 and now trading @50.27--- so do we look at this leverage etfs from that perspective?
2) as you have many times explained a 33% drop in S&P equals a wipeout---as a conservative investor,last 1 year luckily I have trained myself to placing stops/trailing stops (not all exchanges allow this) to limit downside risk--sometimes due to minor market movements however I got stopped out too and didnt get back in time --- but theoretically, if we were to use stops on UPRO/TMF---what is stopping us to place comfortable stops to make sure max hit is just 50%?


Thanks a lot again
Cheers

keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 » Wed Jun 10, 2020 5:55 am

GiveTendies wrote:
Tue Jun 09, 2020 10:50 pm
rascott wrote:
Tue Jun 09, 2020 8:16 pm
Not really the way I look at it. The total equity in the account is roughly $140k.

$70k equity....3x leveraged. So $210k equity exposure. Mainly holding VOO + micro eminis

$70k long duration (roughly 18.5 duration ) 3x leveraged. That's a little tricky to get right. I want something that's similar to $70k in TMF. You can either buy a lot of short term (2 yr).. maybe one Ultra 30 year..... or some combo of contracts throughout the yield curve. For this quarter that came to be one 2yr, one 10 yr and one 30 yr.

Yes that's actually roughly $400k in notional bond exposure (the 2 year is $200k)..... but the duration of the combo is similar to $70k in TMF.

Just calculated this through because I think it is a very smart form of implementation!

Using 1 ZT + 1 ZN + 1 ZB you are sitting at ~530k notional bonds amount with a weighted, adj duration of 6.45 years
2-Year Note (ZT) ~ $200,000
10-Year Note (ZN) ~ $100,000
T-Bond (ZB) ~ $100,000

Thats ~400,000k. Where is the extra $130k coming from?

I am curious about margin. Do you have to keep it in cash or can you keep it in an ETF like VOO (NTSX in my case).

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

Post by occambogle » Wed Jun 10, 2020 6:40 am

Upupandaway7 wrote:
Wed Jun 10, 2020 3:09 am
1) upro/tqqq are still trading at discounts to pre-march 23 levels- does this matter ? As a value investor, if X is trading at X/2 with a potential to go back to X --- always exciting to get in. UPRO high this year was @ 80.36 and now trading @50.27--- so do we look at this leverage etfs from that perspective?
I'm no expert, but could part of that be explained by volatility decay...?
Last edited by occambogle on Wed Jun 10, 2020 6:57 am, edited 1 time in total.

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

Post by TwoIdenticalIndexes » Wed Jun 10, 2020 6:55 am

It is due to volatility decay.

UPRO or TMF being "undervalued" or vice-versa is not a meaningful concept, because the value of your share is a result of the outcomes of various derivative products whose profits and losses have already been realized. There is no underlying capital good which you own, its just cash and a bundle of SPY derivatives. The more those derivatives pay out, the more your money your share gives you a title to. It's like saying that your portfolio is undervalued when you sell low.
Last edited by TwoIdenticalIndexes on Wed Jun 10, 2020 7:00 am, edited 1 time in total.

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

Post by TwoIdenticalIndexes » Wed Jun 10, 2020 6:59 am

Is there a better (not too difficult) method for backtesting than PV's -CASHX substitute for leverage? It might be decent for SPY and UPRO but it isn't for more volatile products, and I can't find a gold product that goes earlier than 2004 (GLD) anyway. I got the sim working once but I'm not sure if it's feasible to replicate for something else.

I just KNOW there is a way to make this more efficient with gold and utilities. They are such easily accessible assets and SO weakly correlated to SPY.

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

Post by rascott » Wed Jun 10, 2020 7:59 am

GiveTendies wrote:
Tue Jun 09, 2020 10:50 pm
rascott wrote:
Tue Jun 09, 2020 8:16 pm
Not really the way I look at it. The total equity in the account is roughly $140k.

$70k equity....3x leveraged. So $210k equity exposure. Mainly holding VOO + micro eminis

$70k long duration (roughly 18.5 duration ) 3x leveraged. That's a little tricky to get right. I want something that's similar to $70k in TMF. You can either buy a lot of short term (2 yr).. maybe one Ultra 30 year..... or some combo of contracts throughout the yield curve. For this quarter that came to be one 2yr, one 10 yr and one 30 yr.

Yes that's actually roughly $400k in notional bond exposure (the 2 year is $200k)..... but the duration of the combo is similar to $70k in TMF.

Just calculated this through because I think it is a very smart form of implementation!

Using 1 ZT + 1 ZN + 1 ZB you are sitting at ~530k notional bonds amount with a weighted, adj duration of 6.45 years

This equates to 70k with a duration of 49 years. Unfortunately, Direxion has removed their adj duration on the TMF website (i swear i saw it a few weeks ago) but using 3x TLT from iShares website, we can approximate 3*18.8 = 56.4y duration for TMF.

So you are a little under TMF's exposure but not by much. Using 2 ZT instead would move your duration to 55y and 3 ZT to 61.3y.


I'm curious how you manage your margin/cash in your account? Do you just sit on the remaining cash or do you hold some money-fund like ETF?
I keep some cash just sitting there.... other was in a money like fund such as BIL. With rates at zero might as well move it out of BIL.....I believe that's actually a negative yielding product right now. In an era where cash paid something might matter more.

Have roughly $33k in cash (23% of account). Now that I think about it, as the account value has increased I could probably drop one micro SP500 contract and move $15k or so into VOO.

Somewhere there is a post on here from Sept (in another thread) where another member helped me use the DV01 values of the Treasury futures contracts to find the appropriate contracts for duration I was targeting. Search for DV01 and you'll find it.

I have only a rudimentary knowledge on the subject, but enough to know I'm close enough and it's worked as I expected so far.

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

Post by rascott » Wed Jun 10, 2020 8:16 am

keith6014 wrote:
Wed Jun 10, 2020 5:55 am
GiveTendies wrote:
Tue Jun 09, 2020 10:50 pm
rascott wrote:
Tue Jun 09, 2020 8:16 pm
Not really the way I look at it. The total equity in the account is roughly $140k.

$70k equity....3x leveraged. So $210k equity exposure. Mainly holding VOO + micro eminis

$70k long duration (roughly 18.5 duration ) 3x leveraged. That's a little tricky to get right. I want something that's similar to $70k in TMF. You can either buy a lot of short term (2 yr).. maybe one Ultra 30 year..... or some combo of contracts throughout the yield curve. For this quarter that came to be one 2yr, one 10 yr and one 30 yr.

Yes that's actually roughly $400k in notional bond exposure (the 2 year is $200k)..... but the duration of the combo is similar to $70k in TMF.

Just calculated this through because I think it is a very smart form of implementation!

Using 1 ZT + 1 ZN + 1 ZB you are sitting at ~530k notional bonds amount with a weighted, adj duration of 6.45 years
2-Year Note (ZT) ~ $200,000
10-Year Note (ZN) ~ $100,000
T-Bond (ZB) ~ $100,000

Thats ~400,000k. Where is the extra $130k coming from?

I am curious about margin. Do you have to keep it in cash or can you keep it in an ETF like VOO (NTSX in my case).

Those are the face value of the contracts.... but not the notional exposure value. You have to look if they are trading at a premium/ discount to the face value, just like any other bond would trade.

ZT ($200k face) , for example, is currently trading at 110'087. So that's equivalent to buying $220k in 2 year bonds.

ZB ($100k face) is 172'31... so $172k.


Futures are cash settled daily... so you need actual cash in your account to cover the daily fluctuations. If you don't have cash you would go on margin with the broker and start paying them interest. If your equity in your account isn't enough to meet margin reqs you'd face a call and they would start selling your funds.

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

Post by Mickelous » Wed Jun 10, 2020 2:01 pm

TwoIdenticalIndexes wrote:
Wed Jun 10, 2020 6:59 am
Is there a better (not too difficult) method for backtesting than PV's -CASHX substitute for leverage? It might be decent for SPY and UPRO but it isn't for more volatile products, and I can't find a gold product that goes earlier than 2004 (GLD) anyway. I got the sim working once but I'm not sure if it's feasible to replicate for something else.

I just KNOW there is a way to make this more efficient with gold and utilities. They are such easily accessible assets and SO weakly correlated to SPY.
SPY - S&P
QQQ - Nasdaq
^GOLD - Gold index
FRESX - Real Estate
XLU - Utilities
VUSTX - Long Term Treasuries

This will go to 1999.

My method is whatever it errors out on in the blue box as far as not being able to go back that far I search for "oldest X fund" in google. The ^gold trick was in a post here.

DarkMatter731
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by DarkMatter731 » Wed Jun 10, 2020 3:01 pm

https://www.cnbc.com/2020/06/10/fed-mee ... rates.html

FED sees short-term interest rates close to 0 for the next 3 years till 2022 and long-run rates at 2.5%.

Correct me if I'm wrong but doesn't this bode fairly well for this strategy (well, using TMF as a hedge)?

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

Post by Gufomel » Wed Jun 10, 2020 3:27 pm

Can someone direct me to which page(s) of this thread discuss UPRO/TMF rebalancing? I’ve seen mention that quarterly is suggested and want to read up more on it.

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

Post by langlands » Wed Jun 10, 2020 4:17 pm

DarkMatter731 wrote:
Wed Jun 10, 2020 3:01 pm
https://www.cnbc.com/2020/06/10/fed-mee ... rates.html

FED sees short-term interest rates close to 0 for the next 3 years till 2022 and long-run rates at 2.5%.

Correct me if I'm wrong but doesn't this bode fairly well for this strategy (well, using TMF as a hedge)?
No, because the market has already priced that in (e.g. TMF went up today based off that news)

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

Post by privatefarmer » Wed Jun 10, 2020 4:19 pm

DarkMatter731 wrote:
Wed Jun 10, 2020 3:01 pm
https://www.cnbc.com/2020/06/10/fed-mee ... rates.html

FED sees short-term interest rates close to 0 for the next 3 years till 2022 and long-run rates at 2.5%.

Correct me if I'm wrong but doesn't this bode fairly well for this strategy (well, using TMF as a hedge)?
Too much focus on the fed. The fed can think and want whatever they want but ultimately it is the GLOBAL market that will direct where rates go. If rates around the globe go further negative then there will be even more buyers of US debt, pushing down our yields. Or vise versa. The fed can buy and sell treasuries and certainly has an impact but the global economic pressures are far more meaningful.

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