Anchoring an account with yield and money management

[ironchef]

I appreciate the response. I wasn't thinking of necessarily black swan type of events but using the risk allocation of the portfolio for highly levered directional types of bets in either futures or equity options, something like that.

The devil is in the details.

Good luck.

 

[comagnum]

How do you grown account to $200k? From disciplined savings over the years first, than you grow it from trading/investing along with continued savings if your working.

From the brokers I am using, $200k of capital is currently yielding me about 180 basis points ($1,800 per year). Now keep in mind my aim is to make >3,500 basis points per year (35%) from trading - so in the bigger picture the yield is not why I have broker accounts.

I was piss poor after blowing up in my 40's & had to pay the IRS $175K I didn't have, not to mention my expensive drug addiction. I worked a minimum wage job, got clean, paid off the IRS, got a better job & inside of about 6 years had saved & traded up to $200k. If I can do it anyone can if they set their mind on it.

Like Warren Buffet said 'I never knew anyone that got rich keeping their cash in the bank'.

 

[ironchef]

I appreciate the response. I wasn't thinking of necessarily black swan type of events but using the risk allocation of the portfolio for highly levered directional types of bets in either futures or equity options, something like that.

If you are still following this thread, then let me give you another answer that Handle123, one of my "mentors", gave a few times on this forum: Dance options around your equity holdings.

Also, comagnum, one of my favorite posters, mentioned Warren Buffett. At one time I tried to backtest Warren Buffett's holdings but could not match the returns of BRK. Then some professors at Yale published a paper saying they could replicate his returns by using ~1.7 leverage on margins.

 

[eaglefeather]

COMAGNUM, it's weird, but 200K seems to be the number I would need in capital to make a living with the system I'm using. I have a lot less than that right now, I guess I'll have to be patient.

 

[srinir]

I've been thinking about this same concept. It rings similar to what Nassim Taleb describes as his "Barbell" approach.

For instance having ~95% of the portfolio in 'safe' yield based investments like T bills/notes or highly rated corporates (it doesn't specifically matter for this explanation) such that you generate a 'base' yield on the portfolio , say 3% (relative to the total equity value of the portfolio), then using the remaining 5% of equity to make high risk high reward types of bets where your maximum loss is no more than 100% so that you can not possibly have a drawdown larger than the difference between your risky allocation of 5% of equity minus your 'base' portfolio income of 3%, of 2%.

The specific % allocations and whatnot could obviously be jiggered around but that's the idea. Is anybody here familiar with a strategy such as this?

What you are describing is similar to Constant Proportion Portfolio Insurance (CPPI) strategy. There are couple of variations around that strategy.

You could google CPPI and can read couple of papers describing that strategy.

https://www.pimco.com/en-us/insight...portfolio-insurance-versus-tail-risk-hedging/
https://www.cfapubs.org/doi/pdf/10.2469/faj.v51.n1.1871