Buying deep OTM puts is likely the essence of the strategy, although in reality they probably run something more sophisticated than the recipe outlined in the book. The firm did gain that in March 2020 but the media made it out to be more than what it is in reality, as always. There is a 2020 Q1 (written on April 7) leaked letter to investors: "Based on your required invested capital at the start of the year, in March 2020 you experienced a +3,612% net return on capital; year-to-date you have experienced a +4,144% net return on capital" Impressive numbers? However: "As in my last Decennial Letter to you, we will show this portfolio effect by updating the performance of the hypothetical Universa “risk mitigated portfolio,” which pairs our actual net performance (monthly administrator-provided net returns, using yours from your start date, expressed as returns on a standardized capital investment) with an SPX position (a realistic proxy for the systematic risk being mitigated). The weightings between the two are 3.33% and 96.67%, respectively, as per the weightings we have always recommended for a fully “tail-hedged” Universa risk mitigated portfolio." +3612% on 3.33% allocation is +120%. While still impressive, it is nowhere near the thousands that showed up in the headlines everywhere. If you had 100% allocation to this fund, you'd probably lose everything within the first year.
Just hit HWM on the PROD system The previous one was on March 19 2020. Looks like Copper, Soybean, Corn, AUD are the top performers right now, but it seems across the board..
Same here! About 2% for the day so far, that copper move is impressive. Also, over the last month or so, I've learned the definition of torture - I'm still long OATs (French bonds). Times like this get me running backtests without carry rule for bonds... But then I look at Bobl and the day is brighter. To summarize, I guess I shouldn't complain at the same time I'm hitting HWM, right?
yeah, that's probably why trend following has the priced-in risk premium - because how "uncool" it feels to run in 99% of the time I'm actually developing a habit of first looking at performance of the PAPER system, and only it it's positive I would look at the PROD, otherwise I'm trying to not even look at it
February is indeed moving along nicely. This month I have siphoned off more money from my futures trading account than I will need to cover my cost of living for the entire year 2021.
Okay folks, I see nobody wants to tell him so I'll do it. You have to get into Bitcoin, Rob. On a more serious note, anybody trading Bitcoin, or newly added Ethereum futures? I looked into Bitcoin, but the contract size is too large for the risk it has to fit into my portfolio. Rob's colleague from the podcast Moritz has a few posts on how he trades that, one on trend following and Bitcoin is here https://twoquants.com/trend-following-bitcoin/.
Actually, only my prod system made a new HWM, the paper system, which is much more diversified (2x instruments and 2x capital) didn't do anything noticeable in the last weeks, so I think it's more of a fluke (just so happened that we're holding some "lucky instruments" this time). And also of course it will start giving it all back again pretty-soon as usual, oh... Bitcoin seems to be just another asset class and if it had a micro-contract or something, sure, why not allocate a small weight in the trend system to it.. I'm still going to try to backtest that stock momentum strategy, it needs 2 extra pieces of information: historical index constituents for backtesting, and ongoing index-constituents for trading. The second piece will be needed forever, and I didn't find that information in anywhere in IB data. Also, dividends and splits are very annoying to get from IB, they don't give them explicitly in the API, except of a single upcoming dividend, and the splits just get automatically incorporated, so you need to redownload each stock history every day to catch that - very inconvenient.. So looks like "Norgate data" is a requirement for this strategy. Though their more expensive historical package will be needed only once, and then it's 360$\year for the package that provides current index constituents (and hopefully nicer dividends and splits). Barchart also has an API which gives index members (https://www.barchart.com/ondemand/api/getIndexMembers), but they don't tell how much it costs (it's that annoying sales tactic "call us and we will decide how much we will be charging you for this", i.e. "how much does it cost ?" - "well, how much do you have?" ). I also liked that idea from the book that essentially investing in a stock-index is like a very slow trend-following strategy, because the stocks that show good performance by definition get included in the index and losers are excluded..
Hi KernFusion. I implemented the Clenow momentum strategy in my system. My system was kind of rudimentary at the time and I used this to expand it, putting in all the individual filters and indicators it calls for, the premise being that I might want to use them in different combinations at some point. I decided to test it on the FTSE100, so I managed to pull together data going back to start of 2007. There are records of index constituent changes out there if you look, and I scraped these to get a fairly accurate, survivorship-aware rolling snapshot of the index over that period. Then I used some free APIs to get historical prices for these. I have heard people say that you get what you pay for in terms of stock price data, but I am yet to find issues with the free data I sourced. The only limitation is the number of API calls you can do... so I just coded something up that ran up to those limits until I had all the data. But stingy really. Anyway, I couldn't really get much success out of this strategy applied to the FTSE100, FWIW. I will come back to it and try to adapt a version though, which is what Andreas advocates anyway. I.e. don't necessarily follow these rules, but use them to work out your own rules.