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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Afrofreak
Posts: 92
Joined: Sat Feb 20, 2021 3:09 pm

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

Hfearless wrote: Sun Nov 21, 2021 8:12 pm
Afrofreak wrote: Sun Nov 21, 2021 8:08 pm I think I'm misunderstanding what you mean by absolute value.
Sorry for being vague. I mean the exact value that the market thinks the rate will take, for example, 0.875%, as opposed to counting the number of hikes.
Afrofreak wrote: Sun Nov 21, 2021 8:08 pm To your second part I would give a resounding "yes".
Yet you’re betting a great amount of money on the market being wrong?
Not sure how that is any different than expected value. 1 rate hike always corresponds to 0.25% increase, so to calculate the exact value, you'd still have to multiply the probable outcomes by their probabilities. I.e., if there was only 2 possibilities, 1 rate hike currently at 60% probability and 2 rate hikes at 40% probability, then the absolute value is: 0.6* 0.5 + 0.4 * 0.75 = 0.6?

It's not that I'm betting that the market is wrong, merely that their expectations are too low. You could argue that this is always the case when the market increases. Expectations are set low for the future and priced accordingly -> Companies meet or exceed expectations -> Risk is eliminated as a likely outcome becomes a certainty -> Stock market rises -> New expectations are set low for the future and priced accordingly.
Posts: 1105
Joined: Sat Mar 21, 2020 10:56 am

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

Hfearless wrote: Sun Nov 21, 2021 8:12 pm
Afrofreak wrote: Sun Nov 21, 2021 8:08 pm I think I'm misunderstanding what you mean by absolute value.
Sorry for being vague. I mean the exact value that the market thinks the rate will take, for example, 0.875%, as opposed to counting the number of hikes.
Afrofreak wrote: Sun Nov 21, 2021 8:08 pm To your second part I would give a resounding "yes".
Yet you’re betting a great amount of money on the market being wrong?
I don't think he's betting on the market being wrong. Like I said, I think these probabilities have a term premium built in. So the market doesn't really expect 2-3 hikes by Dec '23. In reality it expects 1-2, and the +1 is the term premium. It's the profit or reward we get for taking on the risk that there are more hikes than expected. Of course we don’t actually know what the term premium is. The main thing to realize is the cme probabilities aren’t really the market expectation they’re the break even point.
Last edited by skierincolorado on Mon Nov 22, 2021 1:39 pm, edited 1 time in total.
kastenbier25
Posts: 3
Joined: Tue Feb 23, 2021 11:17 am

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

stockmaster wrote: Wed Oct 28, 2020 4:44 pm
kerstverlichting wrote: Wed Oct 28, 2020 3:50 am Hi everyone, I updated my file (v5.0 now) to include some new features:
Made the data refresh check throw an error only if any of the tickers chosen by the user are affected.
Added vanilla 60:40 and 55:45 strategies, easy way to calculate how many shares to buy by simply providing your portfolio value.
Added "a Simple Leveraged Volatility Targeted Balanced Allocation Strategy" from https://wantelbos.github.io/ I copied over the whole logic to Excel. Useful should the website ever not be available. Seems to be a very interesting strategy that I know a few people here are utilizing. For more info, check the website.
Some other minor improvements, including small layout changes.

No new tickers this time. I'm wary of adding too many (Yahoo will start acting up then and not all will refresh anymore). Beside, all the major ones are available already, and instructions to add others are in the file should you require it. Have added the VIX though, to make the wantelbos/Simple Leveraged Volatility Targeted Balanced Allocation Strategy work.

Preview:

https://gofile.io/d/Y8612N
https://www.filehosting.org/file/detail ... 6/AAA.xlsx

@coingaroo, would it also be possible for you to create a mirror again on your hosting?
I've tried using this a couple times and it doesn't work. I'm on linux and tried both libreoffice and google sheets. Does it require MS Excel?

Also, I checked the website for the "Simple Leveraged Volatility Targeted Balanced Allocation" strategy and IDK why he calls it that. VFITX is an intermediate-term bond fund, not VIX.
Does someone have this Excelsheet on Hand, i cant open it an get an refresh error on Excel? Would like to use it. Thanks
firebirdparts
Posts: 2902
Joined: Thu Jun 13, 2019 4:21 pm

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

BoglyIndex wrote: Sun Nov 21, 2021 2:12 pm I was wondering, did anyone figure out how to simulate this strategy with SP500 Options? I have tried simulating multiple ways, but cannot seem to find the right one that would ever come close to UPRO/TMF profits.
This is not necessarily "good", but SPY is very heavily traded, and the extrinsic value is near zero if you buy to give yourself 3X leverage. So it's pretty easy for instance to buy a SPY call a year out for some strike price like 320, and you can get a decent deal on it. They are reasonably liquid. The tendency for leverage to change day to day is not very good, but on the other hand, there's no volatility decay if the market goes sideways. So I think, all in all, it's not bad.

For long term bonds, I don't even try. It might be possible, but I don't do it.
A fool and your money are soon partners
investor.was.here
Posts: 75
Joined: Thu Oct 08, 2020 2:52 am

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

comeinvest wrote: Thu Nov 18, 2021 4:35 pm My (friendly) advice: Sit down once and familiarize yourself with futures, and be done with LETFs and similar intermediaries and middlemen for the rest of your life (except maybe some employer sponsored 401k's).
Tips on how to get there? I tried to sit down once, ended up failing. I wrote up a big list of questions for skierincolorado here. Can you give us an ELI5?
investor.was.here
Posts: 75
Joined: Thu Oct 08, 2020 2:52 am

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

Hfearless wrote: Thu Nov 18, 2021 5:41 pm But ETFs defer taxation, which can then be possibly avoided through whatever tricks are available at the time of retirement, be it relocation to Dubai or taking out margin loans with no intention to ever repay.
Not just that but TYA has a maintenance margin of only 25%. You can borrow against it and earn off the spread to further boost the yield. You'd get another ~2% APY using i-bonds for example.
Tinkerer-in-Chief
Posts: 48
Joined: Mon May 25, 2020 4:20 pm

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

investor.was.here wrote: Tue Nov 23, 2021 1:49 am
comeinvest wrote: Thu Nov 18, 2021 4:35 pm My (friendly) advice: Sit down once and familiarize yourself with futures, and be done with LETFs and similar intermediaries and middlemen for the rest of your life (except maybe some employer sponsored 401k's).
Tips on how to get there? I tried to sit down once, ended up failing. I wrote up a big list of questions for skierincolorado here. Can you give us an ELI5?
Options, Futures, and Other Derivatives by John C. Hull is a good resource.
keith6014
Posts: 489
Joined: Thu Jan 02, 2014 11:58 pm

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

investor.was.here wrote: Tue Nov 23, 2021 1:49 am
comeinvest wrote: Thu Nov 18, 2021 4:35 pm My (friendly) advice: Sit down once and familiarize yourself with futures, and be done with LETFs and similar intermediaries and middlemen for the rest of your life (except maybe some employer sponsored 401k's).
Tips on how to get there? I tried to sit down once, ended up failing. I wrote up a big list of questions for skierincolorado here. Can you give us an ELI5?
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

investor.was.here wrote: Tue Nov 23, 2021 1:49 am
comeinvest wrote: Thu Nov 18, 2021 4:35 pm My (friendly) advice: Sit down once and familiarize yourself with futures, and be done with LETFs and similar intermediaries and middlemen for the rest of your life (except maybe some employer sponsored 401k's).
Tips on how to get there? I tried to sit down once, ended up failing. I wrote up a big list of questions for skierincolorado here. Can you give us an ELI5?
You go to your broker and establish a long position in MES (S&P 500), ZF (ITT), ZN (also ITT) etc. You choose the nearest expiration date, unless it’s too soon—everybody rolls their contracts at about the same time and so should you, the CME Pace of the Roll tool shows when exactly that is. You get exposure equal to the notional value of the contract (~\$120k for ZF, ~\$20k for MES), and it immediately starts vomiting money into your account, or sucking money from it, depending on which way the market moves. The math isn’t complex at all, you gain or lose almost exactly what you would if you purchased that much of the underlying. You need to post some collateral, much lower than the notional value; if you don’t happen to have cash lying around and it’s a margin account, the broker will lend you the money. If you use futures only, your money will be sitting there doing nothing, so you’ll also need to use the money to buy some ETFs to achieve the desired exposure.
Tinyz
Posts: 6
Joined: Fri Nov 19, 2021 9:59 pm

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

Hi guys,

for reasons
Last edited by Tinyz on Fri Nov 26, 2021 5:18 pm, edited 1 time in total.
Kbg
Posts: 109
Joined: Thu Mar 23, 2017 11:33 am

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

Tinyz,

I think in the mHFEA thread a pretty compelling case has been made that levering up ITTs is a good tweak. One could set their stock allocation to whatever they are comfortable with, and assuming there is some allocation to bonds use a mix of futures and ETFs to dial up the treasury exposure.

But at the end of the day we need to do what we are comfortable with.
darkcam
Posts: 5
Joined: Sun Feb 07, 2021 7:06 am

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

Hfearless wrote: Tue Nov 23, 2021 5:59 am
investor.was.here wrote: Tue Nov 23, 2021 1:49 am
comeinvest wrote: Thu Nov 18, 2021 4:35 pm My (friendly) advice: Sit down once and familiarize yourself with futures, and be done with LETFs and similar intermediaries and middlemen for the rest of your life (except maybe some employer sponsored 401k's).
Tips on how to get there? I tried to sit down once, ended up failing. I wrote up a big list of questions for skierincolorado here. Can you give us an ELI5?
You go to your broker and establish a long position in MES (S&P 500), ZF (ITT), ZN (also ITT) etc. You choose the nearest expiration date, unless it’s too soon—everybody rolls their contracts at about the same time and so should you, the CME Pace of the Roll tool shows when exactly that is. You get exposure equal to the notional value of the contract (~\$120k for ZF, ~\$20k for MES), and it immediately starts vomiting money into your account, or sucking money from it, depending on which way the market moves. The math isn’t complex at all, you gain or lose almost exactly what you would if you purchased that much of the underlying. You need to post some collateral, much lower than the notional value; if you don’t happen to have cash lying around and it’s a margin account, the broker will lend you the money. If you use futures only, your money will be sitting there doing nothing, so you’ll also need to use the money to buy some ETFs to achieve the desired exposure.
Wouldn't the margin interest exceed the fees that LETF's have? I'm trying to understand why achieving leverage through futures would be advantageous.
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

darkcam wrote: Tue Nov 23, 2021 4:33 pm Wouldn't the margin interest exceed the fees that LETF's have? I'm trying to understand why achieving leverage through futures would be advantageous.
Portfolio size: \$120k
Desired allocation: 100% SPX, 200% ITT

Implementation 1: 33% UPRO, 66% TYD
Annual cost: 1% of \$120k

Implementation 2: 100% VOO, 2 /ZF
Annual cost: 0.03% of \$120k + 1.5% of \$2k
cflannagan
Posts: 1181
Joined: Sun Oct 21, 2007 11:44 am
Location: Working Remotely

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

Hfearless wrote: Tue Nov 23, 2021 5:33 pm
darkcam wrote: Tue Nov 23, 2021 4:33 pm Wouldn't the margin interest exceed the fees that LETF's have? I'm trying to understand why achieving leverage through futures would be advantageous.
Portfolio size: \$120k
Desired allocation: 100% SPX, 200% ITT

Implementation 1: 33% UPRO, 66% TYD
Annual cost: 1% of \$120k

Implementation 2: 100% VOO, 2 /ZF
Annual cost: 0.03% of \$120k + 1.5% of \$2k
If my calculations was correct, 2 /ZF costs \$80k? As in 1 /ZF costs \$40k?

Would \$60k be roughly the minimum for one to be able to do Implementation #2 (with 1 ZF instead of 2?)
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

The notional value of one /ZF is currently \$121k. But yes, \$60k is the minimum, if you’re going for 1:2 SPX:ITT.
parval
Posts: 87
Joined: Tue Oct 22, 2019 9:23 pm

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

Does the 0.03% futures expense account for roll costs?
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

parval wrote: Tue Nov 23, 2021 10:04 pm Does the 0.03% futures expense account for roll costs?
0.03% is the expense ratio of VOO. Roll costs depend on your broker but should be negligible.
Booogle
Posts: 116
Joined: Wed Nov 09, 2016 3:57 pm

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

Friends, how do I make a SCV version of NTSX?

90% AVUV
10% TMF
cardioverter
Posts: 8
Joined: Sat Oct 23, 2021 6:05 pm

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

Booogle wrote: Wed Nov 24, 2021 7:12 am Friends, how do I make a SCV version of NTSX?

90% AVUV
10% TMF
NTSX is 90 stock/60 ITT. You can't really replicate exactly using ETFs since there's no leveraged version of SCV (that I know of). You'd have to use TYD/TYA to replicate ITT but you would need 20%, which means 80% AVUV.

So you can get close with 80% AVUV / 20% TYD(TYA). Or going futures like some of the folks here.
LeverageWBeverage
Posts: 35
Joined: Fri Jan 01, 2021 5:25 pm

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

TMF is doing its job perfectly this morning with the Black Friday meltdown. Kicking ass and taking names. Up 4.44% as of now
bgf
Posts: 1733
Joined: Fri Nov 10, 2017 9:35 am

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

LeverageWBeverage wrote: Fri Nov 26, 2021 9:42 am TMF is doing its job perfectly this morning with the Black Friday meltdown. Kicking ass and taking names. Up 4.44% as of now
Yep, makes me wonder if I should do a quick rebalance on volatile days like today or just let it ride on quarterly rebalancing
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

What’s also curious is why should the bonds work so well in some cases (today) but not at all in others (September)
quattro73
Posts: 39
Joined: Sun Jun 20, 2021 2:07 pm

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

Hfearless wrote: Fri Nov 26, 2021 11:04 am What’s also curious is why should the bonds work so well in some cases (today) but not at all in others (September)
Yields are falling today, thus bond prices rising.

In September wasn’t that due to rising inflation and rising rates causing profit concerns impacting stocks and bonds? Cannot remember which is good.
Afrofreak
Posts: 92
Joined: Sat Feb 20, 2021 3:09 pm

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

Hfearless wrote: Fri Nov 26, 2021 11:04 am What’s also curious is why should the bonds work so well in some cases (today) but not at all in others (September)
This drop is in response to COVID fears. When the root cause of a drop in equities is a fear of a crash, institutional investors move from risk-on (holding equities) to risk-off (bonds & treasuries) mode. This is why HFEA is market-agnostic. You do alright in either case. When the concern is related to inflation, treasuries do not protect against this. They perform poorly during stagflation, which is why that is so feared among HFEA, it's basically the only thing that can seriously threaten to bring this strategy down save for a complete market meltdown we never recover from. Everything else we are already somewhat hedged against.

In early September (1st - 22nd), TMF did do decently well as TQQQ and UPRO dropped, but then the inflation concerns started controlling the narrative and TMF sank in tandem with equities. We know this to be true because from Sept. 22nd to Oct. 13th, FAS (3x Banks) performed phenomenally while particularly TQQQ continued to drop along with TMF.
Last edited by Afrofreak on Fri Nov 26, 2021 1:23 pm, edited 1 time in total.
huzaing
Posts: 193
Joined: Mon May 03, 2021 2:59 pm

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

LeverageWBeverage wrote: Fri Nov 26, 2021 9:42 am TMF is doing its job perfectly this morning with the Black Friday meltdown. Kicking ass and taking names. Up 4.44% as of now
Yea, but why is UPRO itself crashing. This is just nonsense, it should not be so fickle
muffins14
Posts: 963
Joined: Wed Oct 26, 2016 4:14 am

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

huzaing wrote: Fri Nov 26, 2021 1:01 pm
LeverageWBeverage wrote: Fri Nov 26, 2021 9:42 am TMF is doing its job perfectly this morning with the Black Friday meltdown. Kicking ass and taking names. Up 4.44% as of now
Yea, but why is UPRO itself crashing. This is just nonsense, it should not be so fickle
UPRO down 6.51% today, 2.9x as much as SPY, which was down 2.23%. Not sure what there is to complain about.

Also where’s the “bonds can only lose value”, “yields have nowhere to go but up” crowd at today?
huzaing
Posts: 193
Joined: Mon May 03, 2021 2:59 pm

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

muffins14 wrote: Fri Nov 26, 2021 5:00 pm
huzaing wrote: Fri Nov 26, 2021 1:01 pm
LeverageWBeverage wrote: Fri Nov 26, 2021 9:42 am TMF is doing its job perfectly this morning with the Black Friday meltdown. Kicking ass and taking names. Up 4.44% as of now
Yea, but why is UPRO itself crashing. This is just nonsense, it should not be so fickle
UPRO down 6.51% today, 2.9x as much as SPY, which was down 2.23%. Not sure what there is to complain about.
I'm complaining about SPY itself. It panic drops with the slightest covid news, it's exhausting.
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

huzaing wrote: Fri Nov 26, 2021 1:01 pm Yea, but why is UPRO itself crashing. This is just nonsense, it should not be so fickle
Didn’t we have a similar drop very recently? It is fickle unfortunately, I guess sporadic 2% drops with lame excuses will goad investors into making bad decisions for years to come.

SPY:
2021-01-27 −2.4%
2021-01-29 −2.0%
2021-02-25 −2.4%
2021-05-12 −2.1%
2021-09-28 −2.0%
2021-11-26 −2.2%
rchmx1
Posts: 485
Joined: Sat Oct 26, 2019 6:38 pm

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

You decide to get into a strategy like this because you're ok looking volatility in the face and giving it a friendly pat on the head, not because it's something that stresses you out. Anyways, definitely nice to see TMF working as intended. Glad I've been upping my allocation there over the last couple months, getting it more back to the level it should be.
huzaing
Posts: 193
Joined: Mon May 03, 2021 2:59 pm

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

Hfearless wrote: Fri Nov 26, 2021 5:14 pm I guess sporadic 2% drops with lame excuses will goad investors into making bad decisions for years to come.

SPY:
2021-01-27 −2.4%
2021-01-29 −2.0%
2021-02-25 −2.4%
2021-05-12 −2.1%
2021-09-28 −2.0%
2021-11-26 −2.2%
Yes agree

Btw, is there an easy to generate that table above? If I want to know the dates that the market fell over a certain %, any online tool for that?
Not important, just curious.
Hfearless
Posts: 105
Joined: Sat Aug 14, 2021 9:53 am

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

huzaing wrote: Mon Nov 29, 2021 10:18 am Btw, is there an easy to generate that table above?
I wrote the code myself, it isn’t complicated:

Code: Select all

``````spy = yfinance.Ticker("SPY").history(period="1y").Close
daily = spy / spy.shift()
100 * (1 - daily[daily <= 0.98])
``````
huzaing
Posts: 193
Joined: Mon May 03, 2021 2:59 pm

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

Hfearless wrote: Mon Nov 29, 2021 10:49 am
huzaing wrote: Mon Nov 29, 2021 10:18 am Btw, is there an easy to generate that table above?
I wrote the code myself, it isn’t complicated:

Code: Select all

``````spy = yfinance.Ticker("SPY").history(period="1y").Close
daily = spy / spy.shift()
100 * (1 - daily[daily <= 0.98])
``````