How to best prepare for black swan & other catastrophic events

Quote from Worldcrusher:

My system trades equity options on only the Nasdaq 100 index. I would start the fund only if I could raise US$10 Million. I estimate the fund is scalable up to US $500 Million and would hope to be there someday.
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i seriously doubt you can scale to anywhere near $500m with qqqq & ndx options. with the leverage you'll get from pm or haircut, $500m aum would let you hold positions of many billions of dollars. the daily dollar volume of all qqqq options is only $5-8m. you'd be quadrupling that with your trading, at a minimum.

it's nice to be optimistic but you're totally unrealistic.
 
Quote from Pa(b)st Prime:

I presume your strategy is the naked selling of index premium.

Savvy investors will have little interest in your product.

Zero sum.
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Pa(b)st,

I get that a lot and up to this point, your argument is valid in that there has been little interest in the fund.

Unfortunately, certain parts of my system are proprietary so I can not fully explain how it is different. All I can do is show you the performance and related statistics and let you make your own determination as to who would have interest or whether the system has any merit. It is listed on Collective2 as "QQQQubert." The link is http://www.collective2.com/go/qqqqubert

I have posted as much non-proprietary information as possible about the system in the QQQQubert forums.

Thanks,
Daryl
 
Thank's for the link.

The only thing important to investers in a premium selling fund is your risk management. Everyone already knows that you'll post frequent profits. That's not the issue.

Your drawdowns (though sharp(e), lol) in July and jan/08 were comparatively shallow to other funds of this ilk. What course of action did you take?
Quote from Worldcrusher:

Pa(b)st,

I get that a lot and up to this point, your argument is valid in that there has been little interest in the fund.

Unfortunately, certain parts of my system are proprietary so I can not fully explain how it is different. All I can do is show you the performance and related statistics and let you make your own determination as to who would have interest or whether the system has any merit. It is listed on Collective2 as "QQQQubert." The link is http://www.collective2.com/go/qqqqubert

I have posted as much non-proprietary information as possible about the system in the QQQQubert forums.

Thanks,
Daryl
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Quote from blackjack007:

i seriously doubt you can scale to anywhere near $500m with qqqq & ndx options. with the leverage you'll get from pm or haircut, $500m aum would let you hold positions of many billions of dollars. the daily dollar volume of all qqqq options is only $5-8m. you'd be quadrupling that with your trading, at a minimum.

it's nice to be optimistic but you're totally unrealistic.
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I agree about the leverage and my wife would agree that I am totally unrealistic!:)

However, I limit the fund to 2x leverage. Also, I only make 2-4 trades per month and their entries have the flexibility of being gradual.

I am basing my calculation on having $500M (or $1B leveraged), and only 2.5% would be traded at one time, I would think the market could absorb that, especially given the high liquidity of the Naz market. I may very well be wrong about this and would be happy to re-evaluate because I want to be accurate about this.

Thank you for your guidance.

Sincerely,
Daryl
 
Quote from Pa(b)st Prime:


Your drawdowns (though sharp(e), lol) in July and jan/08 were comparatively shallow to other funds of this ilk. What course of action did you take? [/B]
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Not sure I understand your question, so if I don't answer it, please let me know and I will clarify further. I think what separates my system from others selling premium is that most traders selling puts do not want to acquire the underlying. My system is designed like a business that acquires inventory and buys it at a discount through premiums, time decay and dollar cost averaging. I intend to buy the underlying and I am more long-term in my perspective.

Sincerely,
Daryl
 
Quote from wave:

Some research papers, specifically the first one.

http://web.archive.org/web/20060824054031/http://www.attaincapital.com/pdf/RiskIn9_11TypeMarket.pdf

http://www.eurandom.tue.nl/abstracts_seminars/straetmans.pdf

http://www.pkllc.com/pdf/Significant-Events.pdf
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Wave,

Thank you for taking the time to post those links. I have been reading them and they are very informative and applicable to the question at hand. I will admit, however, that the second link ties my brain in a knot. Here is an excerpt: "We also estimate the co-exceedance probability of observing joint meltdowns in sectoral and market
portfolio indices by employing a dependence measure from bivariate
extreme value theory." I got it after reading it several times, but this is definitely going to take some time to process.

Thanks again!

Sincerely,
Daryl
 
Quote from Worldcrusher:


I have looked at Gold before for the same reasons. However, I did not pursue it, because many traders feel that the relationship between gold (and oil as well) and the markets has significantly changed and historical correlation is no longer pertinent. I am not stating this as a fact, because I honestly don't know if this is true or not. In either case, I am watching the two markets and giving them some time.
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I did a simple little analysis a week or two ago on the correlation of daily price changes in gold and the Naz100, and got a low value, .10, for the last year's worth of data. You should check that yourself, of course.
 
I want to thank everybody who has taken the time to post to this forum. Your replies have been insightful and chock full of great suggestions and guidance. There are obviously many options (no pun intended) in being able to protect a fund from drastic moves in the market.

Based on what has been discussed, how much should a fund allocate towards protective measures? For example, should a fund expect to sacrifice x% of its average gains for such protection? Are there standards that have been established within the financial industry?

Thanks,
Daryl
 
Hope this makes sense

From my experience, the best run for me would have been had I kept the physical in place as well as paper

The mistake I made was to dump the physical and go completely paper which for me, meant there was no possiblity of a bank bail-out

So now, going for a 50% split physical and paper and allowing for a 50% paper loss, is good provided there is put insurance on the profit of the 50% physical

At present, making progress to go back into physical that has a max 12 month turn around (but even this takes time (years)), however, the dilemma would be whether to insure profits at a point where the market has already sold off or be neutral
 
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