OK, I'm about 99% sure I just came up with a way to DESTROY the market...

[destriero]

TQQQs. They give you 3x leverage. Sure, there is a little drag on them, but I've tested and its really not that much.

Now, people talk about how TQQQs will eventually go to something close to zero when the Naz collapses. So you'd be crazy to keep your money in TQQQs long term they say.

But then I started thinking - I know the fix for that! So here is what you do.

You put [90%] of your money in TQQQs. That gives you an equivalent invested in the QQQs or right around 270%. Massive.

Of course, without more, your investment would eventually get obliterated when a real recession/depression hits and Naz dives 50% or more.

But that is "without more". So you are going to do more! What you are going to do is take that [10%] left over amount in your account and buy tons and tons of puts (either on the TQQQ or the QQQs). Enough to cover your [270%] investment, and maybe then some! Strike price can vary depending how much risk you are looking to offset and how much less long-term reward you are happy with.

You've now got a MASSIVE [270%] investment equivalent, and greatly limited downside because of your puts.

The [90%] in the TQQQs and the [10%] in the TQQQ/QQQ puts will be tweaked to give you the downside coverage you want (I just made up those 90/10 numbers as a starting discussion point) - maybe 80/20 is better, for example (in which case you'd still have a ~240% QQQ equivalent LOL).

This is pure money in the bank. You are welcome ETers...

lol fukn moron just discovered synthetic calls into massive rebal/tracking error.

 

[lariati]

I am trying to get into Spitznagel's book Safe Haven but it is hard to know what to make of him. In the preface he basically says don't even try to do any of this type of tail hedging. This isn't a book about strategy. That has made it hard to be motivated to listen to him as what is the point?

He does though mention his mentor, old veteran corn trader Everett Klipp.
"was known as the "Babe Ruth" of the Chicago Board of Trade"
https://en.wikipedia.org/wiki/Everett_Klipp

He basically says Klipp would take a one tick loss if he wasn't up immediately and had no regard for his winning percentage. That might have been worth the entire book as that mode of thinking is quite interesting.

For this thread , not that options are lottery tickets but I can honestly say I have never bought a lottery ticket or a put or a call and I never will. I feel like a trader has to basically be ignorant of the real hardcore quant derivatives literature or they would not want to trade with those that are not. I think of Tankov's Financial Modelling with Jump Processes and even that is probably massively outdated at this point.