Leaderboard

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.

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.