The Beauty of Options - Portfolio Insurance at a Discount

taowave said:
Dest and I are certainly not wrong..We are basically stating the obvious,though it may appear complex..I broke down Bobbys strategy into simple building blocks..I saw it as a backspread and calendar in its simplest form. It was obviously a ratio diagnol,but that would imply someone knew they had a calendar and short vertical..And yes,it is ratioed..Notice,I never mentioned the Greeks..

If you are going to say way OTM option greeks fall apart,state your case..

Bobby has said this is not portfolio insurance,yet the thread title is Portfolio Insurance..No mention of any portfolo..

I have an issue with trading strategies that are billed as "one size fits all",meaning they hold up under any vol enviorment..

You trade ratios and calendars...Im guessing you like a high IV vol for one,vs low IV for the other..

Last but not least,a great trader can make an average strategy look really good..Bobby may very well be a great trader.
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I am burning some midnight oil, just finished a bunch of analysis on @Sweet Bobby's portfolio insurance. Over a 25 year span, it really did not add any value to a simple SPY put-writing strategy. The only times it added value were if I knew when the black swan was going to hit and put on the portfolio insurance around that time, like the first half of 2020. Most other times, all the insurance did was eating up the put-write profits. In aggregate, put-write profits > put-write profits + portfolio insurance profits/losses.

So, for @Sweet Bobby to be so profitable, he has to be a great trader, not one of us dumb amateur retails blindly applying the portfolio insurance he prescribed.
 
LOL...........
You are several steps ahead of me....
Is it Portfolio insurance or not??
If it is,Bobby should quantify how man BPS it costs if the market sits still or rallies,then market it to institutions..

Chef,he got really lucky,but in fairness he made his own luck..But again,Bobby said this was a hedge/portfolio insurance..Any "portfolio insurance" crushed it..

At the end of the day,you are 100 percent right,you have to be a good trader


ironchef said:
I am very confused. Don't know who is right and who is wrong. :banghead:
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guru said:
No one’s wrong. They’re all right within their own worlds. Dest and Tao seem to take strict mathematical approach with greeks, while Bobby trades way OTM where greeks and BS fall apart. I trade OTM ratio spreads and calendar ratios and back ratios, and I’d also have hard time arguing why my trades work and why they’re safe. I think there may be small edge to Bobby’s approach that can be managed or improved with practice. Just like trading butterflies a thousand times could give you more insight how to trade them properly.
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I can’t believe that there’s actually someone here that makes sense! Damn, just damn! I think you’re brilliant!
 
guru said:
I'd absolutely suck at trading condors and you'd think I'm totally dumb, but there are some setups that I've studied/tested and traded so many times that I feel comfortable trading those only.
Likewise, I think that no one can beat you with understanding synthetics or microstructure, or even overall the options domain, but if someone focuses on just one strategy and studies it over and over, they may be able to do better than anyone else who didn't spend much time on that.
Personally I don't like his hedges expiring sooner than his naked puts, but I suspect that with him frequently reviewing his risk, he may be able to adjust those and always stay hedged, whether sometimes it may cost some, while other times he may be able to harvest some theta. I have no problem believing that he doubled one of his accounts trading this specific strategy, even though he may suck at trading everything else, like most of us.
At least he did explain his approach with details that anyone totally clueless wouldn't be able to. He might've just been too cocky in asserting his superiority in trading options :-)
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If you were a woman, I’d probably ask you out on a date. I monitor my risk every day! You complete me, dude. Yes, if I am ever exposed, I would come off the hip and buy additional coverage. Fortunately, I rarely have to do that.
 
taowave said:
Dest and I are certainly not wrong..We are basically stating the obvious,though it may appear complex..I broke down Bobbys strategy into simple building blocks..I saw it as a backspread and calendar in its simplest form. It was obviously a ratio diagnol,but that would imply someone knew they had a calendar and short vertical..And yes,it is ratioed..Notice,I never mentioned the Greeks..

If you are going to say way OTM option greeks fall apart,state your case..

Bobby has said this is not portfolio insurance,yet the thread title is Portfolio Insurance..No mention of any portfolo..

I have an issue with trading strategies that are billed as "one size fits all",meaning they hold up under any vol enviorment..

You trade ratios and calendars...Im guessing you like a high IV vol for one,vs low IV for the other..

Last but not least,a great trader can make an average strategy look really good..Bobby may very well be a great trader.
More...
Indeed, I am a great trader. As a great captain makes decisions based on the sky and sea conditions, that’s really all I’m doing. If the market plunges, I will place condor and butterflies that take advantage of the increased volatility. If the market continues to grind up, I take profits on my income trades while I buy replacement long puts at much favorable prices. It’s rinse and repeat!

This strategy can make money during all market conditions, but not because I’m placing the same exact trades day after day. I am proactive as well as reactive with my opening trades.

I have no idea what trades that I will place tomorrow. But, I have some GTC orders that may fill if market conditions warrant. I don’t care which direction the market goes, I’ll make the trades based on what it does.

Do I even attempt to forecast the future? Somewhat. There is ONE indicator that I use. It was developed by someone much smarter than me. I have in my possession a spreadsheet that utilizes real time data from thinkorswim to give me a pretty good idea about the direction the market is LIKELY to take. It’s not perfect, but damn does it give me an edge.

For those who continue to hate and obsess with my extremely large ego, I get it. I’ll trade me. You trade you!
 
taowave said:
Dest and I are certainly not wrong..We are basically stating the obvious,though it may appear complex..I broke down Bobbys strategy into simple building blocks..I saw it as a backspread and calendar in its simplest form. It was obviously a ratio diagnol,but that would imply someone knew they had a calendar and short vertical..And yes,it is ratioed..Notice,I never mentioned the Greeks..

If you are going to say way OTM option greeks fall apart,state your case..

Bobby has said this is not portfolio insurance,yet the thread title is Portfolio Insurance..No mention of any portfolo..

I have an issue with trading strategies that are billed as "one size fits all",meaning they hold up under any vol enviorment..

You trade ratios and calendars...Im guessing you like a high IV vol for one,vs low IV for the other..

Last but not least,a great trader can make an average strategy look really good..Bobby may very well be a great trader.
More...
Way OTM option Greeks fall apart. That is what I’m saying. I didn’t know that when I started the journey. Fortunately, Ron Explained this. I was skeptical, but I see it play out daily I’m this portfolio. I’m carrying almost -$300 in daily theta and it does not cause my account to draw down! It just doesn’t. Dest won’t even entertain the possibility that Ron is correct. That’s fine. I’m now absolutely comfortable carrying that amount of negative theta.
 
ironchef said:
I am burning some midnight oil, just finished a bunch of analysis on @Sweet Bobby's portfolio insurance. Over a 25 year span, it really did not add any value to a simple SPY put-writing strategy. The only times it added value were if I knew when the black swan was going to hit and put on the portfolio insurance around that time, like the first half of 2020. Most other times, all the insurance did was eating up the put-write profits. In aggregate, put-write profits > put-write profits + portfolio insurance profits/losses.

So, for @Sweet Bobby to be so profitable, he has to be a great trader, not one of us dumb amateur retails blindly applying the portfolio insurance he prescribed.
More...
Iron chef, I’ve always respected your input. You are onto the secret sauce here. You just can’t blindly put the hedge on and walk the damn dog. This is a complex strategy that involves multiple “if x, then y” decisions. My trading plan is well developed and is a 73 page document outlining the entire process.

I started the hedge fund this year only after I saw what the strategy was capable of producing. I brought in one of my lifetime friends to teach him the strategy in the event that I pass away so that the strategy can continue to provide for my family’s future.

Do I brag a bit too much? Oh it’s all in fun, much as Rush Limbaugh tongue in cheek states that he is performing his daily host duties with half his brain tied behind his back, just to make it fair.

I exhibited a bit of showmanship. Just had my end of quarter analysis with my business partner. Here’s the cold, hard truth. If there is another drop in the market like what what happened in February and March of 2020, this portfolio in its current state will be up a minimum of $77,000 with a maximum potential of $310,000!

There will be those who laugh and ridicule the above forecast, but those folks ain’t sleeping under my roof. I would love to have a discussion group with other like minded traders to talk about these things. As most of you know, trading can be a lonely endeavor. You can’t talk about this stuff with most of your friends. Their eyes begin to glass over. That’s why most of us come to a place like Elite Trader. We come here to discuss those things that we can’t discuss with anybody else in our “normal” lives. But the moment you start sharing, along comes a dick like Poopy Des that makes you withdraw and hold back and never won’t to share with any human age because Des makes you realize that there is a segment of human kind that is not kind! He represents the Bully in school that made you dread every day of you school life. He makes you wonder why should I even bother sharing anything with anyone! Yet, I know there are good people on this forum like you who wants to make learning a two-way Street. I’m trying to just stay in my lane and avoid the head on collision.
 
taowave said:
LOL...........
You are several steps ahead of me....
Is it Portfolio insurance or not??
If it is,Bobby should quantify how man BPS it costs if the market sits still or rallies,then market it to institutions..

Chef,he got really lucky,but in fairness he made his own luck..But again,Bobby said this was a hedge/portfolio insurance..Any "portfolio insurance" crushed it..

At the end of the day,you are 100 percent right,you have to be a good trader
More...
You say tomato, I say salsa. This particular portfolio is now an incubator fund traded at TD Ameritrade under a Delaware limited partnership. The management company is an LLC with my best friend and I as the only members. Future profits of the management company are split 50/50.

The fund is not yet open to outside investors. I anticipate (and my attorneys are preparing) for a transition out of the incubator stage at the beginning of 2021. Robert Green has advised me regarding the tax structure of the fund, and based on my consultation I have decided to only trade 1256 contracts. NFA exemption has been secured.

The ship has been commissioned and there’s no turning back. This particular shop happens to thrive on icebergs and generates meteoric returns as we encounter them. But when the seas are smooth sailing, we also make money. And, it’s not because we make the same exact trade over and over. I’m a seasoned veteran, and I’m more than ready for what lies ahead.
 
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