K, I think I just figured out how to get almost GUARANTEED edge...

[Saltynuts]

So, the problem is so many people think they can find an edge by NOT buying and holding. But, as has been proven time and time again, it is EXTREMELY hard to beat buy and hold over any meaningful time period (several years plus).

So, why fight it? Why not just incorporate buy and hold?

So, here is what you do. You put 100% of your capital into SPY. In a margin account.

You've done your back testing, you know some scenarios where you should go in BIGGER or go in LESS. Like, for example, in some other thread someone said on days when the SP500 has had 3 down days, if you buy and hold for 3 days, you 3 days you hold will be, on average, far more positive than your average day.

But you are NOT going to NOT buy and hold, because the number of times such a scenario comes up are relatively few. You just could not compete with buy and hold.

So, again, you are going to be 100% invested in buy and hold. HOWEVER, on those days where you've done your back testing and you have statistical proof that being long or short those days were significantly outperform, you will go long or short ON MARGIN. So on those special days you might instead be 105% invested. Or 110% invested. Or 90% invested. You can adjust for your risk tolerance.

Now, if your back testing is even half arsed, and remains relevant for future time periods, you know you are going to profit on those trades. So you guesstimate what you anticipate profiting on those trades. Of that guesstimated profit, you buy some tail protection. Maybe like SPY puts 30% out of the money or something. Something so that, when 2008 comes around again, you are well protected. And those you are buying on margin, to be funded by the profits you make from your margin special trades. All the time remaining 100% invested (subject to less on those special days), thus buy and hold.

So what do you have? You have a portfolio that on average has all the benefits of a pure buy and hold strategy, but you have some marvelous tail protection. On average your portfolio will perform at least as good as a buy and hold, but with SIGNIFICANTLY less drawdown.

And that, my friends, is creating edge and beating the market...

 

[Handle123]

What happens is it is Oct of 1928? And there is no rebound. Those buying on margin are bankrupt. Keep buying puts with high prems. So you might lose 80-90% value of your SPY, 100% invested, might have to hold it 20 years till price comes back up, wasn't till after World War 2 ended, stock market went back up. If the Dems win, market lose, after awhile don't matter who wins when prepared.

 

[ET180]

What happens if market stops making new highs? Japan last made a new ATH in 1989. It's around half the level it was back then. 30 years is a long time to wait. For young people, think it makes sense to have a part of their portfolio permanently invested. Time is on their side...as long as the US doesn't turn into Japan.

 

[Saltynuts]

What happens is it is Oct of 1928? And there is no rebound. Those buying on margin are bankrupt. Keep buying puts with high prems. So you might lose 80-90% value of your SPY, 100% invested, might have to hold it 20 years till price comes back up, wasn't till after World War 2 ended, stock market went back up. If the Dems win, market lose, after awhile don't matter who wins when prepared.

I think you misread my post Handle123. I would have puts with strike 30%ish below market, so very cheap, and they would protect me even in that scenario (heck, might come out ahead if I do it right).

 

[Saltynuts]

What happens if market stops making new highs? Japan last made a new ATH in 1989. It's around half the level it was back then. 30 years is a long time to wait. For young people, think it makes sense to have a part of their portfolio permanently invested. Time is on their side...as long as the US doesn't turn into Japan.

In that scenario I would have still likely vastly outperformed buy and hold haha. Maybe not made a ton, or none, but STILL better than buy and hold, probably much more so.

 

[traider]

If you have edge on those special days, you should just work in a hedge fund to trade those days. Investors pay a lot for non correlation to spy performance , you can have > 100M even if your returns are less than 10%.

 

[Saltynuts]

If you have edge on those special days, you should just work in a hedge fund to trade those days. Investors pay a lot for non correlation to spy performance , you can have > 100M even if your returns are less than 10%.

Thanks, maybe some others can take advantage of working for a hedge fund or whatever, but I don't need that, have plenty of money, really just focus on winning in my own account and helping you guys out. Love this place.

 

[Handle123]

I think you misread my post Handle123. I would have puts with strike 30%ish below market, so very cheap, and they would protect me even in that scenario (heck, might come out ahead if I do it right).

Mr. Saltynuts, I understood your position, but losing 30% is like 96.00 lower before the puts strikes, to me that is a huge loss and if it goes sideways for awhile, you go 30% below this area? The puts might be very cheap, but the 96.00 be cheap for you to lose?

 

[tommcginnis]

So, you're going to use puts almost like a "portfolio insurance"?
And but the "cheap" ones?

When they're cheap, they're cheap for a reason.
For that *same* reason, they will be expensive when you want them, and will be worthless when they will no longer do you any good.

Just as they are now.

Sorry, SN, but there be no cut in your edge.

 

[Fx-Game]

If you buy and hold, you ARE the market (participating 100%).
So actually the question must be: Are you sure that the US will defend it's rang in the economical world, or not?!

This is much more a national question.

If you bet on Asia like this, you are not just taking care of your finances, but taking side.