I have been a professional trader the past 20 years, working in some of the largest global banks and one of the major US IB. My experience is mostly in FX and Interest rate derivatives, and mostly in emerging markets. I have had very little exposure to the equity markets, other than as macro factor(Always had my money passively managed). I have been on a COVID induced sabbatical from the financial industry since early this year. At the end of July, and after binging on everything on Netflix, Amazon and HBO I decided to dip my toes in trading equity/equity options. I will share some of my experiences and results.
Opened a trading account with a low 6 figure balance to trade cash equities/ETF and level III options. From the start I decided I was going to pursue a more contrarian strategy. My idea was to generate positive returns with strategies that would offset negative periods in my non-discretionary passive goal oriented accounts. The focus was to be weekly, bi/weekly and monthly positions. So, swing trading rather than intraday stuff. I always believe that markets provide BIG opportunities 3-4 times a year were one can size up. This last point would be the second leg of my strategy.
Since my strengths lie in global macro trends, I have stayed away from individual stocks, except for those who provide a theme. i.e. Financials, Oil to name a couple. If I choose an individual stocks I tend to look for blue chip names were the probability of an ENRON moment is much lower. So in financials I would choose a JPM for example. Mostly I trade the $SPX, since it is cash settled and SPY and QQQ in lesser volumes. 90% of my positions are in options, and 70% of those have been in limited loss strategies, call spreads, put spreads, Iron Condors etc. 25% in outright long options(this is were the big money is made in my humble opinion. The remainder in naked options in small sizes. 10% overall in cash equities and ETF;s.
I started rather shaky as I came to grasp with the volatility of the equity markets. I was lucky that I had mostly winning trades in short S&P call spreads, as I had some pretty big swing in p/l early on. I realized quickly that my positions were too large. Had a couple of 8% swings to the down side, but never broke my drawdown limit and all of them reversed the next day. After those initial scares I reduced size in my short options strategies and increased size on my long options positions, and things improved dramatically. Since those early days in August and early Sep, the performance has improved dramatically and I have achieved my goal. I have beat the S& P 500 with less volatility and with a negative Beta.
As of Dec 18, 2020, using daily log returns.
Start 28 Jul, 2020
Sharpe Ratio : 1.8296046791489862
Sortino Ratio : 2.206217845864511
Info Ratio : 68.64%
Beta : -0.17712463144203955
Alpha : 0.9123384290783765
Portfolio Return Annually Compounded : 84.12% (27% in absolute terms)
Benchmark Return Annually Compounded : 40.69%
Portfolio Benchmark: SPY
Risk Free Rate Annual : 0.08%
Calendar Days : 143
Observations: 104
Too early to tell if I can replicate this consistently or if I can scale up. Have yet to have a real punch in the mouth, although I am very disciplined in keeping 2:1, 3:1 p/l ratios. Also macro themes, or market themes have been easier to see. For example, the recovery in Bank stocks was a big theme for me and the gains from that position will be hard to duplicate moving forward.
All in all, I expect to be back to work q1 2021 and thus will have to close my options account, but until then I will try to keep learning this markets and making the best of the situation.
Regards,
Bomp
Opened a trading account with a low 6 figure balance to trade cash equities/ETF and level III options. From the start I decided I was going to pursue a more contrarian strategy. My idea was to generate positive returns with strategies that would offset negative periods in my non-discretionary passive goal oriented accounts. The focus was to be weekly, bi/weekly and monthly positions. So, swing trading rather than intraday stuff. I always believe that markets provide BIG opportunities 3-4 times a year were one can size up. This last point would be the second leg of my strategy.
Since my strengths lie in global macro trends, I have stayed away from individual stocks, except for those who provide a theme. i.e. Financials, Oil to name a couple. If I choose an individual stocks I tend to look for blue chip names were the probability of an ENRON moment is much lower. So in financials I would choose a JPM for example. Mostly I trade the $SPX, since it is cash settled and SPY and QQQ in lesser volumes. 90% of my positions are in options, and 70% of those have been in limited loss strategies, call spreads, put spreads, Iron Condors etc. 25% in outright long options(this is were the big money is made in my humble opinion. The remainder in naked options in small sizes. 10% overall in cash equities and ETF;s.
I started rather shaky as I came to grasp with the volatility of the equity markets. I was lucky that I had mostly winning trades in short S&P call spreads, as I had some pretty big swing in p/l early on. I realized quickly that my positions were too large. Had a couple of 8% swings to the down side, but never broke my drawdown limit and all of them reversed the next day. After those initial scares I reduced size in my short options strategies and increased size on my long options positions, and things improved dramatically. Since those early days in August and early Sep, the performance has improved dramatically and I have achieved my goal. I have beat the S& P 500 with less volatility and with a negative Beta.
As of Dec 18, 2020, using daily log returns.
Start 28 Jul, 2020
Sharpe Ratio : 1.8296046791489862
Sortino Ratio : 2.206217845864511
Info Ratio : 68.64%
Beta : -0.17712463144203955
Alpha : 0.9123384290783765
Portfolio Return Annually Compounded : 84.12% (27% in absolute terms)
Benchmark Return Annually Compounded : 40.69%
Portfolio Benchmark: SPY
Risk Free Rate Annual : 0.08%
Calendar Days : 143
Observations: 104
Too early to tell if I can replicate this consistently or if I can scale up. Have yet to have a real punch in the mouth, although I am very disciplined in keeping 2:1, 3:1 p/l ratios. Also macro themes, or market themes have been easier to see. For example, the recovery in Bank stocks was a big theme for me and the gains from that position will be hard to duplicate moving forward.
All in all, I expect to be back to work q1 2021 and thus will have to close my options account, but until then I will try to keep learning this markets and making the best of the situation.
Regards,
Bomp
