Recent content by manic

Based on my backtests, adding some VIX exposure has produced better risk-adjusted and absolute returns than adding puts. However, VIX exposure wouldn't save you during a bear market that lasts for years, like the dot com bubble collapse or Great Depression. Puts would be better in this case...

TQQQ is still in a drawdown if you invested during the tech bubble. The bottom line is that short SQQQ or long TQQQ requires some sort of market timing or hedging. You are right that a long, slow bear market will crush a short SQQQ strategy. However, it will also crush a long TQQQ strategy...

A big difference is that interest rates are much lower now. During the 2000 and 2008 crashes, the Fed funds rate was about 5% and didn't start dropping until the crashes were well underway. During the 2018 and 2020 bear markets, bonds were yielding much less, making poor alternatives to stocks...

Shorting SQQQ is my most profitable strategy.

You'd want to do the opposite. You would actually get pretty good returns shorting TQQQ and going long QQQ. You'd even get a negative beta, meaning this could be a good hedge.

Yes, the simulation is accurate. The reason TQQQ is so low is because of the daily compounding of 3x returns. During the tech bubble burst, the NASDAQ fell by almost 80% in a year in and a half. Let's consider that roughly 400 trading days. That means the average decline was about 0.004% per...

I simulated the price of TQQQ starting from 1999. To the veterans here, what was the tech bubble like? It looks so "obvious" in hindsight, but it's always different in the trenches. Did most of you get out in time?

TQQQ is still in an 80% drawdown from its tech bubble peak, even though the Nasdaq is up 270%. That said, if you had bought it any time other than a few months during the peak of the bubble, you'd be quite profitable today. Buying and holding TQQQ is a low alpha strategy. You are better off...

My approach right now is to sell SQQQ calls and buy VIX or VXX calls with the premium. VXX trades at 1.5x the IV and VIX trades at twice the IV. However, the average downward betas are 2x and 4x as high as SQQQ, respectively. This has worked well in the past, but there is no guarantee it will...

Not a fan. Mechanically selling covered calls is going to result in worse returns than simple buy and hold. Often, the returns are drastically worse because of whipsaw due to selling calls during a market bottom. If you want to sell covered calls, it's imperative to employ some sort of market...

Shorting volatility ETFs is a bad idea, especially if you aren't using any sort of market timing. It might be ok to short them if you've developed a system to identify volatility peaks. You definitely do not want to short them when volatility is at a relative low. If you want to short decaying...

Sell calls and buy puts. You can also buy put spreads instead of calls. Or, you can sell your covered calls at a higher delta and keep rolling them until the market corrects.

SPY is greate. Tried and true. QQQ is probably a bit better. Leveraged ETFs get hit hard during long bear markets, like in 2018. I am not sure how they would have managed in something like 2008. There probably would have been a 90% drawdown or more. You would have recovered eventually, but it's...

The Fed prints money to buy bonds but does not print money to pay the interest. That has to come through taxation. The Fed supposedly returns most of the interest payments to the treasury, but the money still has to come from taxpayers. Why the Fed doesn't just print the interest is illogical to...

The Fed should have increased rates more gradually. 0.25% a year would have been fine. In fact, without Trump's interference, the Fed might have tried to raise rates well past 2%. The Fed is private institution that tends to apply a lot of subjectivity in its decisions.