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Obviously I was providing a very simplified approach. Though in real life this is how hedge funds (and myself) make trades. If you can reduce the volatility of a trade that has a positive slope, you can lever up on it. Very important to distinguish pure leverage from an actual source of returns.

Yes but it’s not as simple or as feasible as I made it out to be. It is how a highly trained team of analysts would approach this, though.

Sure. 1) open a portfolio margin account 2) go long your top 20 best high dividend payers/dividend growers and short spx— you need to be beta neutral 3) this will allow you to lever up 4-8x (so your $1MM is now $8MM of assets) 4) spend each morning using excess cash to hedge out both market and...

Long straddle.

1- Have you not heard of mercantilism? 2- The government can and already does institute such policy, it’s just currently at a higher cost.

Where did you come up with this figure 10%? Do you have any evidence to explain and back this? Just curious. https://www.federalreserve.gov/releases/h41/current/ Which ones? Again curious. https://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html That may be true but it still does not...

Flabbergasted by how misinformed this view is. Only about 10% of annual gdp is available in physical currency (there is literally less than $3t in printed money). The Federal Reserve already creates digital assets through reserves (which exist digitally lol). Digitizing the dollar just means...

Good points. At the end of the day, lining up conviction with size is what’s key. If you’re playing with butterflies, you are either expressing a view on the direction of the underlying or its volatility. That’s the driver of your conviction. If a trade moves against you, is your thesis still...

Also— important distinction to make between position pnl, position weight, and portfolio pnl. If you have a single position and your weight is 100%, if it moves up 10%, the position is still at a 100% weighting. So if you have a position of 2%, with a max weight of 5%, and it goes up 100%...

You want to be consistent on both the long and short side. There’s a difference between adding to a position based upon conviction (e.g. starting at 1% and moving up to, say, 5%) versus drifting (a position goes from 1% to 10% from gains). In poker terms letting positions drift in weight is...

On the risk management front, strategies like Kelly criterion are really designed to ensure that you are taking the optimal level of risk while still ensuring the ability to survive a series of losses. A good rule of thumb is to max your cost limit by the expected volatility of your positions x...

You should follow @destriero and @Same Lazy Element who are both professional vol traders. Check out Destriero's trading journals as well.

:D:D:D

I'm actually a bit more optimistic on prospects in the US. I live in San Francisco and I can tell you that the entrepreneurial spirit is alive and well. People from all over the world come here to start businesses. A friend of mine recently started a food manufacturing business (from private...

@DiceAreCast I’m pretty much in alignment with you. I think it is important to hold government accountable, and that it needs to serve a very clear purpose. It strikes me that politics revolves around story and narrative, and not on competency and strategy, which means it is going to be skewed...

How do you resolve the free rider dilemma and issues around informational asymmetry? I’m a capitalist, but I’m also a realist. A pure free market is a hypothetical.

Can you explain what you mean by socialist policies? Do you mean having a mixed market economy, like the public ownership of goods?

When was this? If you give me time frame I can look it up for you.

Follow @destriero and @Same Lazy Element

I hate to break it to you, sir, but I think your children’s perspective is probably more realistic. Build a diverse portfolio using a duration approach: 1- short term: outlook should be based upon what you think average rates, gdp growth, and policy will look like over the next year 2- mid...