Free left tail convexity. Am I kidding myself?

I tested the strategy without increasing the size. The hedge worked in feb/mar 2020.
Important is to close the strategy when vix is very high!
During the build up op vix from 15 till 40 the result is still negative.
Most of the time the strategy had 3 short puts with approx 120 dte and 6 long puts with shorter DTE.

 

So most of the time, it was net long 3 puts? It seems that you initiated the sim at the "worst" possible time and it still didn't blow up. Monetizing during a "crash" will be important. Thank you for taking the time.

 

I started the strategy in jan 2018. I will export some transactions

 

Could you please check the transactions

 

I also tested the strategy with 240DTE. The results are much better because you will be net more long puts. With only shorting 3 puts starting from jan 2018 the max results was more then 100K in march 2020.

 

The transactions look good once I got used to the format. Bang on. Earlier I posted my actual average time to complete a "cycle" (selling to open then buying to close) is 28.9 days. The 240DTE results are interesting. My concerns for my use case are that the 240DTE put will be much further OTM. Also, I'm not using this as a stand alone strategy but use it to hedge structures that are 5 months out. I only need to hedge for 3-4 months because my structures build up negative deltas via charm (and to a lesser extent vanna). I'd say your sims are very consistent with my results noting that I'm increasing by 3 shorts (and therefore eventually 2 longs) per "cycle".

 

Thanks for the check. It doesn't matter that the longer dated puts are further OTM. The vega of these longer dated positions is bigger, so profit will be greater in situations like feb 2020.
With vix above 40 it is all about vega. Results are 5 times the 120 dte results..

 

5x is significant. I guess we can forget about the weighted vega discussion.....your results don't lie.
Thank you

 

Is it a -3 +2 turnover on your transactions?
I thought it was sell x3 buy x5?

edit: ops... I think I understand now, is it buy 5 so what I see is the +2 net?

 

I'll take these results at face value given that I'd be much more concerned about cherry-picking and over-fitting. Let's face it, 3 years isn't exactly a long time. That's just little ol' me though... I'm quite a risk averse person.