Are there any "black swan" type ETFs, etc. out there?

[SoyUnGanador]

If there are, I'd like to test how holding some of them as a minority piece of your account affects performance/drawdown ratios.

The only thing I could come up with off hand was UVXY (and other VIX products, but I think it has the highest leverage). I was wondering if maybe holding some small portion of it in your portfolio might reduce the max drawdown percentage enough to make it worth holding, despite the overall drag on the portfolio. But it doesn't look good.

UVXY started trading on 10/4/2011.

If you bought and held SPY on that date you would have had an IRR of 14.11% and a max drawdown percentage of 33.72% by my calcs. The IRR/DD ratio is 41.84%.

If you put just 1% of your portfolio in UVXY (rest in SPY), your IRR drops to 13.2%, and your max DD to 31.70%. The ratio is 41.63%.

2% it goes to 12.28%, 29.64% and 41.43%, respectively.

Your drawdown does drop some, but your IRR just keeps getting hammered worse the further you go.

Anyone know of any black swan type funds out there that I might try instead?

Thanks!

 

[SoyUnGanador]

Shoot, I meant to post this in ETF section, apologies.

 

[SoyUnGanador]

black swan type funds etf - https://www.dogpile.com/serp?q=black+swan+type+funds+etf

LOL, thanks, I think? Video was nice.

 

[TheDawn]

Soy, UVXY and all those VIX volatility funds are for trading only and not really for holding. These funds are designed to deteriorate to eventually the value of 0, holding them in a portfolio is very very very expensive imo for this once-in-a-life black swan event that may or may not come. It's so much easier and cost-effective to just hedge against your positions to protect them from any unexpected downturns.

 

[SoyUnGanador]

Oh I am fully aware of that TheDawn. Which is why I am looking for alternatives to try and model! You said:

"
It's so much easier and cost-effective to just hedge against your positions to protect them from any unexpected downturns."

That's exactly what I am trying to model! So do any of those things you mention have tickers I can plug into finance.yahoo.com historical data section and get price quotes? I mean the kind that I can easily slide into the spreadsheet. For example, finance.yahoo probably has option quotes that you can pull, but given their constant expiration I'd probably have to pull a ton of option spreadsheets and do a ton of work. But if there was an option ETF that just maintained some kind of option hedge type thing I could just pull quotes from that in, easy peasy.

Thanks!

 

[emulimu]

These funds are designed to deteriorate to eventually the value of 0,

I always wondered about this. What will happen if we short them and hold?

 

[TheDawn]

Oh I am fully aware of that TheDawn. Which is why I am looking for alternatives to try and model! You said:

"
It's so much easier and cost-effective to just hedge against your positions to protect them from any unexpected downturns."

That's exactly what I am trying to model! So do any of those things you mention have tickers I can plug into finance.yahoo.com historical data section and get price quotes? I mean the kind that I can easily slide into the spreadsheet. For example, finance.yahoo probably has option quotes that you can pull, but given their constant expiration I'd probably have to pull a ton of option spreadsheets and do a ton of work. But if there was an option ETF that just maintained some kind of option hedge type thing I could just pull quotes from that in, easy peasy.

Thanks!

Didn't realize that you are actually looking to hold them in your portfolio instead of just trading them.

There is very little I would venture to say almost no securities that you can actually hold that are completely negatively correlated with the market. Some do get close like gold and USD so maybe you can hold these in your portfolio? There are numerous gold and USD ETF's with prices that you can pull out of any data service for you to model.

 

[TheDawn]

I always wondered about this. What will happen if we short them and hold?

The prices will just get lower and lower and lower until they become too low and the issuing company will just do a reverse split to boost up their prices and the whole process starts all over again.

 

[Zwaen]

Sell every quarter 1 3m atm put, buy 2 puts 0.95*atm?

(It's for black zwaens though)

 

[emulimu]

The prices will just get lower and lower and lower until they become too low and the issuing company will just do a reverse split to boost up their prices and the whole process starts all over again.

Yes, but will we make money? Let’s say, if we short it at $10 and buy it back when it gets lower and lower, say $1. If it looks too good to be true, it usually is. So, wondering what am I missing.