Should I hug the Index

xandman

xandman

I think it would be better to Index part of the account. Perhaps, up to 50%. In fact, I know some every astute people here just trade the index.

What would be a index core strategy?

1) A strip of calendars throughout the year on the SPX hedged with SPY, covered calls (naked puts), or SPY collared. I like the idea of laddering across curve to make things more predictable.

2) How much leverage should you be running with 1x market volatility? Seems like 4:5 is the leverage for somebody protecting capital but is still aggressive. Benchmark Gamma/theta ratios? I leave myself discretion to trade to exp.

3) Opportunistic buying of insurance, far OTM like Taleb?

4) Can IB reporting filter core and non-core performance so I don't have to resort to sub-accounts?

Not looking for secret sauce stuff here like timing signals. Just some solid advice which could be a source of future reading. Thanks.
 
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I think if your goal is to replicate the index, because you feel stock picking in general is not a better strategy, then keeping it simple seems best. Pick an index, buy the ETF, and live with the results...period, for that percentage of your assets you want to do that with. Any insurance buying or option selling, will add another unknown that might or might not do better.

If you want to second guess this "always long strategy", then I would rather increase or decrease the size of the position during times where you are bearish rather than buying protection, which is typically expensive. Pick a core size that you will always keep long, and play with the rest.
 
I do that in my global allocation via IRAs. Considering that tends to make me under allocated in the trading account except for the times when I'm punting deltas.

Depending on the 12 mo period that I generate a report, I do see some value in opportunistic buying and selling but it is questionable. It's usually not variance reduction, so I can only ascribe it to the leverage effect. Additionally, Sharpe ratios seem to require thousands upon of thousands of data points to be statistically significant. A level of transactions that I won't generate from discretionary trading.

Thus the index hugging, before I end up firing myself.
 
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Isn't that derogatory in your neck of the woods?

Chicago don't use no index. It's against the spirit of Alternative Investing which is what we have mostly.
 
In New York we just like to make money. We don't care what you call it or how we get it done.

Almost all of my clients trade futures, options on futures and options on equities. Alternative investing is more what we do. We don't do asset allocation, like an asset manager. Those guys do mostly stocks, bonds and insurance portfolios. That's not for me. It is however very common for professionals like lawyers, doctors and business owners to hire asset managers for that, In my "neck of the woods ".
 
Bullish market, not 2/3rd account Long, on Bullish sectors on Bullish stocks.

Put the other 1/3rd on bearish sector bearish stocks.

Covers you for directional changes.
 
I like the idea of being long/short, with the intent of gaining alpha in both direction. Still hard to implement without a full margin account or options and a lot of homework.
 
While the put ratio strategy is one of my favorites, it's been very hard to find candidates in markets that have been on a slow upward grind. I can buy really cheap SPY puts from the flat skew, though.

I do have IPO, Social, Solar energy, and Transportation on watch if a bear run starts. Waiting on Energy as a value play. The traditional, late stage sector leader.

To be frank, school starts on Monday. I should turn this account into an annuity product. BXM with puts across the curve. I am willing to accept less than market return for a few months with minimal management. I hope newwurldmn chimes in. He probably has some novel structures.
 
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