Pension funds and other retirement funds shouldn't even be invested in equities, but because morons have embraced globalism (falsely masquerading as free trade), we have policies like zirp to make tbonds and other "saving" vehicles worthless along with QE to cause massive price inflation in equities while underlying values remain flat or in decline. Selling puts is just one way to be long a stock, and it comes along with the benefit of theta instead of margin interest costs. Drawbacks are limited upside and reduced delta...I pity the fools who are relying on pensions managed by 3rd parties.
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Pension Funds Selling Puts
- Thread starter stuntman
- Start date
Pension funds have been investing in stocks and far riskier asset classes for decades, who do you think the LPs are for PE and hedge funds? I think you may be confusing what is optimal for you in a personal retirement fund as you approach and pass retirement with what is optimal for a retirement fund. They're no where near the same thing.Pension funds and other retirement funds shouldn't even be invested in equities, but because morons have embraced globalism (falsely masquerading as free trade), we have policies like zirp to make tbonds and other "saving" vehicles worthless along with QE to cause massive price inflation in equities while underlying values remain flat or in decline. Selling puts is just one way to be long a stock, and it comes along with the benefit of theta instead of margin interest costs. Drawbacks are limited upside and reduced delta...I pity the fools who are relying on pensions managed by 3rd parties.
If it's anything like what HOOP was doing years ago, it's pretty sophisticated and it's mainly leveraging the insider knowledge of the insurance (specifically VA) vega flow. They were selling 10y strangles at implied vol ranging between ridiculous (lets say 25 vol) and ludicrous (30 vol).
PS. The HOOP trades were BIG. They also run a bunch of people over, caused a minor funding crisis and other fun things
PPS. BTW, Warren "Derivatives Are WMD" Buffet engaged in a similar strategy too, in a more exotic form.
PS. The HOOP trades were BIG. They also run a bunch of people over, caused a minor funding crisis and other fun things
PPS. BTW, Warren "Derivatives Are WMD" Buffet engaged in a similar strategy too, in a more exotic form.
Is hoop Ontario?
dumb thread. selling puts is the opposite of buying them. buying puts for protection is a bad strategy and you always end up overpaying because puts are too expensive
There is neither mystery nor surprise here. The pension funds are simply doing what I do:
Interest rate are too low to make any money on.
I need to generate income in this low interest rate environment
So I sell puts to get the equivalent of a dividend payment that I can't get elsewhere.
Selling the puts is no more risky than buying the stock and you get a much higher return on the cash. The cash you need to put aside in case you are put isn't earning anything anyway.
However:
As the market has gotten overextended it might be better to sell calls rather than puts.
Interest rate are too low to make any money on.
I need to generate income in this low interest rate environment
So I sell puts to get the equivalent of a dividend payment that I can't get elsewhere.
Selling the puts is no more risky than buying the stock and you get a much higher return on the cash. The cash you need to put aside in case you are put isn't earning anything anyway.
However:
As the market has gotten overextended it might be better to sell calls rather than puts.
This is silly... Pension funds shouldn't be invested in equities? ZIRP making tbonds worthless?Pension funds and other retirement funds shouldn't even be invested in equities, but because morons have embraced globalism (falsely masquerading as free trade), we have policies like zirp to make tbonds and other "saving" vehicles worthless along with QE to cause massive price inflation in equities while underlying values remain flat or in decline.
You're an interesting one. I did a quick search on you and it appears you've limited your contribution to this board to calling anything and everything "dumb". Do you actually have anything to contribute, or is that all you've got?dumb thread. selling puts is the opposite of buying them. buying puts for protection is a bad strategy and you always end up overpaying because puts are too expensive
Yup, 'em Canadians...Is hoop Ontario?
They are selling extreme-tenor (10 years) overpriced vega and, coincidentally, also riding the delta (some sales were puts, some were longer-dated strangles, which are long-delta also). Statistically, it's a really good strategy if you have the components necessary to carry it, nothing like what Karen The Supertrader did.
Yup, 'em Canadians...
They are selling extreme-tenor (10 years) overpriced vega and, coincidentally, also riding the delta (some sales were puts, some were longer-dated strangles, which are long-delta also). Statistically, it's a really good strategy if you have the components necessary to carry it, nothing like what Karen The Supertrader did.
Those guys are smart and they know how to handle those perpetually high risk premiums.