Managing Funds for a Living

[paysense]

Yeah..gonna take a bit longer to establish metrics at C2. With JADE had BTO 1000 to STC 10 calls but then BTO 90 and then 9000 (didn't take of course, lol).

So since the 90 aren't covered I closed the 90 and took a .10 (spread) loss.

Chalk that up to making sure the system trades 10 contracts for 1000 shares of stock (not 1000)

That's what this thread is for...to establish these same targets are met with C2, an independent audit.

Each day, week and month there will be lots to peruse. Some may even be useful. GA

 

[paysense]

Anyone lend much credence to the Vix/Vxn?

 

[Rearden Metal]

Quote from paysense:


What gives you the right to decide for others that because one uses covered calls with some success - that they are somehow inept or dishonest?

<b>He</b> didn't decide that- This axiom has been common knowledge among industry professionals, ever since options were invented in the 1970's!

You're selling bus tickets from Chicago to NY with an unnecessary detour through Texas, without you or your passengers realizing that a direct route even exists! If you understood the difference between covered calls and naked puts, you'd understand why you don't need to drive through Texas to get from Chicago to NY.

 

[Cache Landing]

Paysense,

I'm not trying to be mean. I'm actually trying not to be mean.

In response to your comment about my performance, I thought I had already made reference to a real-time track record averaging about 6.5% monthly regardless of market direction.

I'll try to clarify my points; you can do with them whatever you want.

1) If you do know as much as you claim to know, you'd realize that you are recommending an inferior strategy. It isn't an opinion, it is a fact. I could mimic your strategy trade-for-trade using the synthetic, but I would use much less buying power and have lower commissions.

If you know this, you shouldn't be knowingly recommending an inferior strategy. If you don't know this, then you are still a trading novice and you shouldn't represent yourself as an expert.

2) You keep making reference to yourself as a hedge fund and your aspirations of accumulating millions in the fund. That goal is fine. When I first started trading, I did it with $500. It just seems that you don't know how the industry works.

As a hedge fund you aren't concerned about relative returns. Hedge fund investors want absolute returns. You stated that you want to outperform the market. This is not the goal of a hedge fund. This is the goal of a mutual fund. Hedge funds don't care about the market, they want certain returns regardless.

With a CC strategy your only option in the case of a bearish run is to move into cash and wait. This is not acceptable to hedge fund investors. They will simply take their money and find a manager who actually does know how to adjust to fit market conditions. In other words, they want their returns. Hedge fund investors aren't interested in capital preservation. They are looking for growth.

3) CCs might do ok even in slightly bearish markets if the manager is good at picking bottoms. However, if that manager really does know something about options he would realize that there are much better ways to pick bottoms than covered calls. So your strategy is inferior in almost all circumstances. The covered call is for the novice or institutional investor who either doesn't have the knowledge or ability to trade better strategies. I'm sorry, but that is the plain and simple truth of it.

It's fine that you want to become a successful manager. I wish you all the best. The reason for the overwhelming criticism of your posts is that you claim to be an expert. An expert knows the points that I made above. If you are what you claim to be (an expert), then you are deliberately scamming money from unwitting beginners. This is not my opinion. Rearden Metal explained why this is the case.

If you want people to take you seriously, you need to either recognize the superior strategies and recommend those. Or you can admit that you don't know as much as you thought you did, and ask others for some help becoming what you want to be.

 

[BJL]

Quote from Rearden Metal:

<b>He</b> didn't decide that- This axiom has been common knowledge among industry professionals, ever since options were invented in the 1970's!

You're selling bus tickets from Chicago to NY with an unnecessary detour through Texas, without you or your passengers realizing that a direct route even exists! If you understood the difference between covered calls and naked puts, you'd understand why you don't need to drive through Texas to get from Chicago to NY.

Ah, but selling naked puts isn't the same as writing covered calls is it?

 

[paysense]

2CL:

Fine. I'll admit I do not know what lies ahead. Obviously there is much to learn - and I will, thanks to your's and everyone's help.

What I do know is that I am able to derive the results you've seen - with the strict use of covered calls. On this - and only this - I am an 'expert' and I intend to continue to show this (without calling myself an expert).

Since you are so adamant concerning the use of naked puts (which I have previously outlined that I can in fact use fairly well) in this public forum I will record a list of naked put trades to juice up returns during the next downtrend.

You will have to admit that there are many hedge fund managers that perform well in a declining market - not all markets. Their returns may not even be that great. Yet, they still retain much interest.

However, I do not plan on embarking on their trail, nor am I seeking to become an 'industry professional'. I don't want to manage everyone's money. Why should I? Some day, I will embark on a journey with a few individuals with what I know. The learning process will continue, with results still satisfactory.

Maybe in the coming year, you'd like to take my Market Direction calls (which are dead-on) and substitute the synthetics and compare results. Using less cash for the same risk, would be an easy transition. The same returns and fund volatility with index-based instruments, also sounds good.

Let's get one thing out in the open right now. In regards to bantering about the term 'hedge fund' my only claim is that covered calls do in fact provide a hedge (from losses).

With regards to managing funds, I am limited to my "average" annual return with the strict use of covered calls. Does this make me an 'expert'? I don't think so. I will leave that to those that are. In all honesty, I have not seen any manager (hedge or mutual) that consistently exceeds 50% for 5 years+.

At this point, anything contructive is well worth the time. God knows I've endured more than my share of life's curveballs, and He knows the last thing I am trying to do is steer someone wrong. That would be too easy. Paysense

 

[stereo70]

paysense -- why don't you just become some scammy Financial Advisor until the bull ends -- you'd fit right in -- you could grow the moustache back and add a VUL to your client's (sic) portfolio...

 

[paysense]

Quote from stereo70:
"paysense -- why don't you just become some scammy Financial Advisor until the bull ends -- you'd fit right in -- you could grow the moustache back and add a VUL to your client's (sic) portfolio...

OK here's the scenario. Let me know if I get this right - keep in mind I haven't taken time to read much here on ET.

Many people come here. Much fewer actually post. There are many forum sites, but this is popular because the many considered 'elite'.

So you are one of many considered prominent. Have/had a professional career, status, well-bred upbringing, loving families, children, grandchildren, pay college tuitions and have been in and around investments for years. Perhaps are or were a finance professional.

Net worth exceeds 1M perhaps 5 or 10M. Perhaps have much locked into 401k's, have large firms manage your money - maybe even have a stake in some hedge funds. Perhaps have much experience and fun with funds you actually manage yourself.

You spend time here reading and posting and generally speaking about your experiences and enjoy providing finance-based guidance. Perhaps have even developed a repoire and have built up certain trust with the others.

You'll retire rich and happy and die. In the meantime have enjoyed life and are enjoying life and share your thoughts here from time to time. It' s just plain enjoyable. After all, you are who you are and that's what matters, right?

Yet you take money so seriously. Who really gives a hoot? Apparently a whole lot of individuals, since they spend so much time in and around it. This explains a lot, frankly.

Which leads me to wonder...if you are not accomplishing much more than this, why get so bent with off-the-wall remarks? I have used this common suggestion: If you find something that works, why not take 1/10 your net worth and compound it consistently.

I don't mean with what I'm doing. But soon you'd be moving well-beyond your entire net worth and can get on with whatever. You would be in a much better state to share your thoughts, because you'd actually be doing something we'd all like to hear about.

Paysense

 

[atticus]

Quote from paysense:

Yet you take money so seriously.

Perhaps it's a matter of knowing the bare-minimum to get by; i.e., that a CC is a synthetic short put. The vast majority of option traders on this site are far more knowledgeable. Sorry, it's a simple truth. The value of that knowledge is best applied in getting out of a jam, not in beating the benchmarks.

You've got a chart expressing a move from $250k to millions, but no mention that the chart represents a hypothetical scenario.

Gil -- accept my friendly advice and stop pissing into the wind on this thread. You're embarrassing yourself.

 

[asap]

paysense

i am going to offer you some help for your so called hedge fund. the most widely used directional strategy is the the collar, which is comprised of long stock short call and long put. the collar advantage over the covered call is that limits the downside exposure while maintaining the same upside potential. this is accomplished by using some of proceeds from the short call to buy a protective put. there are professionals that have using collars to generate positive returns in the market for quite a while now and their stories have been published in case you want to investigate.

the proper way to use this strategy is by using its synthetic equivalent, which is called a vertical spread. this spread in its bullish form is comprised of either long call and short upper strike call or short put and long lower strike put.

if you claim that your covered calls picks are so fine performers, then i would suggest that you analyze how an equivalent vertical spread strategy would have performed in those cases. the evident conclusion is that the vertical spread would yield a bit less return per unit, but at expense of fraction of the covered call risk. in addition, since the vertical spread is very light on capital requirements, one can have the idle cash earning interest, which adds to the positive expectancy of the strategy. in the long run, the vertical spread is a statistical winner because it eliminates the black swan event type of risk while offering an interesting upside potential per risk unit.

in all circumstances, the vertical spread beats the covered call in the long run, with the exception of an objective of establishing a long position in the underlying, in which case, the naked put (synthetic covered call) is the adequate strategy.

good luck