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- Yesterday
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suhailakh joined the community
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Thank you, Chris. Exactly the analysis i was looking for!
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Scott, Not a problem. Better to not to rush. Best to take your time to do it right, even if it take an extra few weeks. Thanks for your efforts. Bill Avellone
- Last week
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PotentialDelta joined the community
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Still a post-mortem, on a year where we under performed, is reasonable. The short answer is pretty simple: 1. We hedge on average 5% out of the money and this costs 7% (with zero leverage); 2. So in theory you cannot be down more than 12% on a year -- cost of hedge plus out of the money. 3. We did worse -- why? 4. Two primary reasons. First, we also have the diagonal that pays for the hedge. Ideally we have the 100 put and are selling 99 puts against it -- so even if market swings dramatically, worse case is we keep rolling that 99 put and make $0. In reality we can get skewed a bit as the market goes up -- we have the 100 long put and are now selling 104 puts against it -- that can be a loss of $4. This happened --- but that might get us from -12% to -15% -- how did we do so much worse? 5. Well we saw something that had never occurred before across the market -- the market dropped over 15% (over 20% actually) AND volatility went down. Given we always planned for a gain from volatility when the prices crater, this hurt us, as we were under hedged AND the value of the long puts on our diagonal dropped by more than expected. 6. We had to roll the position in year, which always cost money. 4+5+6 = under performance The biggest factor was the drop in volatility along with the market drop. In Soteria Fund we solved the loss on the diagonal by changing they way we pay for the hedge -- but it's one that you need several million dollars in an account to do AND one that has margin available. (Another reason I love the fund). For instance, one thing we do is get much higher returns on our excess cash. Thy way the math currently works is, on a $1m account, I can get 1.6 to 1.8x leverage (about what I want) for only putting $500,000 out the door. I can then make 10% on that other $500,000 -- or $50,000. At 1.5x, the cost to the portfolio for the hedge is 9%. Well just that cash trade made 5% back -- so now the cost of hedging is down to 4%. The other way we pay yields 5% with MUCH lower risk than the diagonal. As for the diagonal on the site and in managed accounts, we try not to get the short positions as much above the long strike as we did before AND we don't view the drop in volatility in a market crash likely again (though it can happen). Further, the cost of hedging is down significantly, which means instead of hedging 5% out of the money, our most recent roll was more at the money -- so more protection. I don't see us losing as much on the diagonal as we did moving forward. I don't see the declining vol in a crash happening again. And we have a better hedge in. Ideally that helps avoid a year that bad. But as noted, in the long run, we're still SIGNIFICANTLY better. Having a down year that basically matched what the market did isn't ideal -- but if we beat in up years and match in down years, that's a way better long term result. If we can beat in up years AND not be as bad in down years --- well then we get back to liking the trade even more, As always, use leverage at your own risk and know down years are OF COURSE possible -- all investments carry risk.
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Unfortunately, I am still waiting on the final approval from the Secretary of State. The attorney is currently working on providing some final documentation that was requested. I am hoping for a launch date of 4/1, but I will update everyone as soon as I can.
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It will for the OPEN positions -- as we'll start paying less interest on them immediately. But for new ones, no, as interest rates are baked into option prices. There's a reason if you open a collar trade like this on a major stock immediately before ex-dividend, the yield you get is virtualy identical to the interest cost of the trade.
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it does include leverage -- but the amounts vary depending on trades and what's opened when. The current portfolio is posted, and the account started with $150,000, so as of Mar 6, the leverage was about 8x. KALU trade was assigned/expired so haven't updated the numbers for that yet (as trade has not finished clearing).
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AllanFallah joined the community
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Thanks for confirming!
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Thanks, @Kim! Appreciate your and Contributors ' push for alpha!
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pharmafund joined the community
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It's leveraged Anchor since 2019. I believe Chris is looking to tweak the strategy all the time, and @greenspan76 provided a pretty good explanation for 2022. btw, I recommend reading How Anchor Survived the 2020 Crash. On March 19 2020, SPY at 234 (down 30%), Anchor UP $5k (~3%).
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Thank you for sharing the recollections @greenspan76. Must have been a tumultuous year to go through and to keep the faith in the midst of a painful drawdown.
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I hear you! Multiple Mungerisms would probably apply here too!😁
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I don’t recall a specific discussion on the forum about this and am not really bothered too much by one year’s result since this is intended to be a long-term strategy, but my own personal analysis was this: 1) the market whipsawed enough to yield near-worst case results, and 2) the puts underperformed expectations, despite market conditions. On my trade, I know there were 3-4 times that the short puts from the diagonal nearly reached their target gain to roll, but the market quickly reversed and they turned into a large loss, so that alone was probably 5% loss on account just due to poor timing/random noise. Lastly, I personally concluded that it was better to roll up the longs of the diagonal more frequently to avoid a large spread in the long and short. I believe this was discussed briefly somewhere in the forum.
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@Kim - really appreciate the color! Makes sense intuitively. Does the published rerurns table for Anchor show the numbers for its Levered version or the Regular? The CAGR says 20% for Levered, but the main table heading refers to "Anchor", without a qualifier. Were there any strategy adjustments made, esp. around the hedge constriction coming out of 2022? .
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I know members who cancelled their Anchor subscription in 2022, just in time to miss the remarkable recovery.. Sell low buy high?
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I'm pretty sure that most fund managers would be very happy with 20% CAGR and 28% drawdown.. There is no reward without risk. Charlie Munger said: "If You Can't Stomach 50% Declines in Your Investment You Will Get the Mediocre Returns You Deserve". That said, I remember Chris mentioned that considering the magnitude of the market decline, IV did not spike enough - VIX spent most of the year in the mid 20 and spiked only for short periods of time to low/mid 30s. This means that long puts did not increase in value enough to provide adequate protection. If you also consider that this is a leveraged strategy, this can definitely explain the underperformance of this single year. Members who were with Leveraged Anchor from inception in 2019 were still up 78% even after the drawdown.
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Nobody has answered his question. It isn’t an absurd question.
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Import is a built-in feature of ONE. You can import from Tradier, or a number of other brokerages as long as the CSV file is in the correct format for that brokerage.
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Perfect! Thank you @rasar for the detailed insights. Just a follow up then - is the trades/fills "import' a function embedded in ONE or is it something you would do by hand?
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I looked at and acknowledge the overall picture around this strategy. Am specifically curuous about the one year where almost a third of a model portfolio went up in smoke with a massive 1000bps lag to the market to boot, especially given the donwside protection emphasis in the strategy thesis . I think it is a fair due diligence question. There had to be a discussion, so I am looking for a link to it. Appreciate the patience with me.
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(note: the explanation below relates to the Beta version, which I use. In terms of the mechanics, It's probably the same in the regular version). 1. Yes, you can. Be aware, though, there's a small confusing thing that happens when you begin to modify an open order, then change your mind and leave it alone. The "Cancel" button actually cancels your existing order instead of simply closing the modify window. Instead, there's a little "X" on the top right corner which serves to simply close the dialog. I don't have any open orders right now, so I can't attach a screenshot. 2. Yes, but not really. When you send an order to open the trade, you have 2 choices - either Save it to the database but not to Tradier, or conversely, send it to Tradier but not save it to the database. So after you do "Send without Save" to Tradier, it will show up in the "Orders" window. After it fills, only the Orders window knows that it filled, and not the database (since it didn't get saved there). You have to then "Import" the filled trade into the database in order to see it as part of your ONE portfolio.
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Is there an update on -steadyvol-managed-fund?
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MLK joined the community
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Yehuda joined the community
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Agreed, Kim. Just looking for a post mortem / insight into what had hurt the strategy so badly (28% down for Anchor vs. 18% down for SPY) in 22, and the group's learnings from it.
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I think most brokers won't allow options spreads in retirement accounts.
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I will let Chris to comment specifically on 2022, but as a general note, Anchor delivered 20% CAGR since inception compared to less than 15% SPY CAGR. This is a massive overperformance, and this is what's important. I don't think it's realistic to expect from any strategy to overperform 100% of the time.
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@cwelsh - I am not a Anchor subscriber yet. Is there a discussion of the 2022 notable Anchor underperformance vs SPY in one of the forums? Really intrigued with the Long Term power of the strategy, but would be curious to understand what transpired in 2022 specifically. Thank you.