MONTHLY UPDATE MAY 31 REVIEW ⢠Personal account values as of todayâs close was $732,387. ⢠Incubator hedge fund: values as of todayâs close was $110,231 ⢠I have had some questions from the forum regarding difference in performance between personal account and the fund. It seems to me that the difference is because of 2 factors. The fund is not fully allocated yet since I like to accumulate positions over time; therefore the return is less now. The other factor is that when ever you enter a position there is a cost (Commissionsâ bid-ask spread), in the personal account the positions where bought a long time ago, while in the fund everything is new positions so it has more of an effect. I would expect that after the 1st quarter of the fund the returns should be similar. ⢠May was different month then April.. In April as I noted in my April report almost every asset class has been moving higher and almost every single of my strategies has preformed well. In May the stock market was cautious and finished the month in the red (the fact that the market retreated in May might actually a positive thing going forward, keeping the market from becoming overvalued) however fixed income, dividends, and short volatility where OK in May. (Off course we also had the silver âbubble burstâ we discussed in the April report.. Where does silver go from here? Will leave that to those that are good in predictionsâ¦) I have also started a couple of new strategies which are mostly hedged, off course when doing a hedge you need to make sure that the hedge will not âhurtâ your performance. ⢠Going forward, I think at the 4th quarter I will start to gather some âpoints of interestâ in the fund. At that point I will have a 36 month track record in my personal account, a 6-9 month track of the fund, and hope to have $1 million from my own accounts (personal and fund together), which probably makes easier the launching process. Looking forward for your comments and advice, hope to have next report June 30
I guess you would not expect me to lay out all my strategies here on elite trader⦠But yes, short VXX was profitable and so were some other fixed income and dividend strategies.
Thanks, and no, I don't expect you to. It seems that you are better hedged than I thought based on the earlier discussion.
Thanks for your advice. I am not launching a fund yet, neither do I do solicitations. Also I actually have an attorney already; he specializes in hedge fund launching, and is advising me how to handle things. Thanks again.
Hi Atticus, I appreciate your comments. I am aware about your opinion regarding VXX from your comments in February. After your comments then, I have made some more extensive analysis on this strategy and decided to stick to my short volatility strategy based on my situation, I donât regret that decision. I would probably hold on to that going forward, unless the VIX goes to 12-13, or circumstances change. As a general rule I think short VXX depends on 3 factors, the size of your short position, your time horizon, and your general portfolio allocation. Looking forward for more of your insight.
VXX went from 500 to 20. Its one of many ETFs that seem to consistently decay no matter what. VXX may pop to 30-40 but that would just be another great shorting opportunity.
It's just that I don't see 16 VIX as sustainable beyond the Summer months. It's trading 600 bp over cash now, but traded at a 40K bp premium at the peak (VXX/VIX). The convexity is such that it seems that you'd want to spread it off against some futures due to the roll-premium or at least sell some OTM put ratios (bear-delta synthetic straddles).
The idea that some people suggest that VXX âcanât possiblyâ spike higher then 30-40 is not accurate. In 2008-2009 VXX (hypothetical) spiked much more then that. Having said that, I do expect VXX to peak very soon.