Can I keep my Sharpe ratio higher then 4 for the rest of the year?
- Thread starter macintash
- Start date
Just wondering if your curve is going to look like this in the near future.
http://www.iasg.com/groups/group/ljm-partners/program/ljm-aggressive-strategy
http://www.iasg.com/groups/group/ljm-partners/program/ljm-aggressive-strategy
You can't discuss risk management without discussing strategy. Doesn't register.
And I think the previous poster's point was that LJM's draw-down for 2012 was -0.72%. But it's draw-down in 2008 was 64%... so again, your Sharpe + DD for last year is really meaningless without discussing what you do, and how you do it.
Hm, I am pretty sure you've mentioned you traded vol.
My question is do you worry about some kind of a freak/flash-crash event? are you flat eod? I suppose if it's play money it's not a big deal if you lose half of it.
I am worried just holding XIV. Some day, I'll figure out what kind of a daily drop in the market would take XIV down to 0. Could be just a 10% drop but I don't know how to figure that out yet.
My question is do you worry about some kind of a freak/flash-crash event? are you flat eod? I suppose if it's play money it's not a big deal if you lose half of it.
I am worried just holding XIV. Some day, I'll figure out what kind of a daily drop in the market would take XIV down to 0. Could be just a 10% drop but I don't know how to figure that out yet.
Heech, you have commented several times before, but a lot of your comments I answered already before. Re the DD question I have a hard 10% stop loss which should take care of the 64% DD concern. And the notion that you canât have a risk managment /position sizing discussion without detailing what you are doing I think is inaccurate. There are some basic risk management tools like max risk on a trade, stop loss, max acceptable DD, market correlation, and how sensitive it is to an upheaval event etc. I also think that max âdaily DDâ and a daily Sharpe ratio (not monthly DD) generally gives a good feel for the risk of a strategy, I would bet that LJMâs max daily DD was more then .72%.
Stop loss / max risk on trade are great tools, for certain strategies.... like if a) you only trade liquid instruments with tight spreads in all conditions, and b) if you only trade intraday thus are flat overnight / weekends, c) you only trade delta-one instruments without optionality. Otherwise, as history proves, those concepts are worthless. I have no idea what you trade, but your refusal to open up will raise doubt in any but the most naive investor.
As far as LJM's intra-month DD, I agree it was definitely higher than 0.77%. But I doubt it's high enough to let us suspect they would lose 64% in two months, if 2008 were to repeat. We would have to understand what they traded to know that risk was always there.
The DD risk in LJM was easily noticeable in its first 4 years of existence. -36% in 98, -18% in 99, -34% in 2000, -24% in 01, -46% in 02, almost all of it happening in months that the market crashed see enclosed the LJM monthly history going back to 98.
1998 n/a n/a n/a n/a n/a n/a -1.77 -36.99 41.73 3.64 -0.96 -0.22 -10.16%
1999 3.27 10.38 5.32 3.51 7.59 3.91 3.46 7.33 10.10 -18.14 10.52 4.48 60.52%
2000 4.83 6.45 -34.72 -9.38 8.45 6.77 5.59 7.15 2.76 1.50 -4.64 12.70 -3.07%
2001 10.01 -2.61 -0.02 2.50 6.81 3.71 3.50 0.60 -24.25 5.00 12.67 6.65 21.02%
2002 6.40 4.49 3.34 2.08 7.90 -0.68 -46.17 4.42 6.16 3.59 5.65 16.68 -4.24%
2003 0.98 13.53 4.39 7.84 2.26 1.93 5.52 4.20 2.70 10.00 3.15 -2.48 68.20%
2004 4.11 8.27 3.63 4.22 4.85 4.40 4.66 3.63 4.77 -1.74 -0.16 3.51 53.83%
2005 6.73 1.54 1.38 2.26 3.33 4.02 0.54 4.87 5.08 0.88 -0.58 5.97 42.21%
2006 3.08 4.00 4.00 3.34 -1.86 4.55 0.92 5.27 1.34 1.81 2.81 3.38 37.72%
2007 5.07 -2.98 0.07 -11.58 -0.64 4.77 -5.42 8.60 7.14 4.08 5.65 6.71 21.25%
2008 -12.39 14.99 7.13 4.54 5.77 4.94 4.62 4.39 -15.58 -57.15 0.56 3.58 -48.47%
2009 4.14 2.43 -3.09 9.37 5.74 6.26 -6.72 5.62 4.40 -0.42 8.40 6.47 50.02%
2010 3.57 5.95 0.56 -1.06 -6.32 6.61 4.79 8.19 -0.50 5.62 2.89 3.39 38.20%
2011 3.93 1.16 4.31 0.13 6.71 1.66 -8.18 -34.30 6.95 3.48 9.72 8.72 -5.10%
2012 5.56 3.10 1.68 7.73 6.96 1.69 -0.45 6.90 -0.72 4.62 0.28 43.71%
1998 n/a n/a n/a n/a n/a n/a -1.77 -36.99 41.73 3.64 -0.96 -0.22 -10.16%
1999 3.27 10.38 5.32 3.51 7.59 3.91 3.46 7.33 10.10 -18.14 10.52 4.48 60.52%
2000 4.83 6.45 -34.72 -9.38 8.45 6.77 5.59 7.15 2.76 1.50 -4.64 12.70 -3.07%
2001 10.01 -2.61 -0.02 2.50 6.81 3.71 3.50 0.60 -24.25 5.00 12.67 6.65 21.02%
2002 6.40 4.49 3.34 2.08 7.90 -0.68 -46.17 4.42 6.16 3.59 5.65 16.68 -4.24%
2003 0.98 13.53 4.39 7.84 2.26 1.93 5.52 4.20 2.70 10.00 3.15 -2.48 68.20%
2004 4.11 8.27 3.63 4.22 4.85 4.40 4.66 3.63 4.77 -1.74 -0.16 3.51 53.83%
2005 6.73 1.54 1.38 2.26 3.33 4.02 0.54 4.87 5.08 0.88 -0.58 5.97 42.21%
2006 3.08 4.00 4.00 3.34 -1.86 4.55 0.92 5.27 1.34 1.81 2.81 3.38 37.72%
2007 5.07 -2.98 0.07 -11.58 -0.64 4.77 -5.42 8.60 7.14 4.08 5.65 6.71 21.25%
2008 -12.39 14.99 7.13 4.54 5.77 4.94 4.62 4.39 -15.58 -57.15 0.56 3.58 -48.47%
2009 4.14 2.43 -3.09 9.37 5.74 6.26 -6.72 5.62 4.40 -0.42 8.40 6.47 50.02%
2010 3.57 5.95 0.56 -1.06 -6.32 6.61 4.79 8.19 -0.50 5.62 2.89 3.39 38.20%
2011 3.93 1.16 4.31 0.13 6.71 1.66 -8.18 -34.30 6.95 3.48 9.72 8.72 -5.10%
2012 5.56 3.10 1.68 7.73 6.96 1.69 -0.45 6.90 -0.72 4.62 0.28 43.71%