Fund? What fund? its a retail brokerage account, where you buy and sell some puts and calls on the SPY. Come on man try and keep it real.
Beta measures correlation of returns to the overall market. If your Beta is .75 and your "fund" is pure long directional then you would make more money simply owning SPY versus the option legs assuming the Beta relationship which is backwards looking holds up. It is really meaningless overall. No one asked Buffet's beta or Soros's beta, all they want to know is whether they make money year in and year out and how volatile are the returns. Trust me, no one is going to inquire about the beta of your Schwab account, just how much money you make annually. Focus on making money and forget statistics professors invented.
Beta may be meaningless to you, that's fine, but if I am to describe what my system relies on, I HAVE to include it because it's important to me. The beta of the account is being managed from .75 to 2.0, market sentiment being the major factor. And yes I am just selling and buying calls and puts on the SPY. Theoretically, I should be at 0% compared to the SP500 less commissions, fees, etc. That's if you believe in the EMH. But the results speak for themselves.
EMH has no relevance to where you stand in regards to the S and P 500. Beta is meaningless in the context youâre using it, in the same way you giving your account some sort of index value. You donât have any sort of index or any valuation method for an index. The components in your so called index change constantly, by definition thatâs not an index.
My quest is to beat the sp500. How much clearer do I have to make it? MOST actively managed mutual funds do not beat the SP500. As far as EMH goes, there was a pretty big IF in my statement. Again, the plan is to BEAT the SP500, and you say comparing to it is irrelevant. I don't follow your reasoning. Adjusting the beta of the account is part of the strategy so how is it meaningless?
Your quest is noble, yet you donât consider economies of scale. Beating the S and P 500 in a Schwab or other small account is a lot different then beating it as a real fund manager. No fund manager in the world is just buying or selling puts or calls on the SPY etf and calling that a fund. The nature of the options is such that the delta is in a constant state of flux and therefore the beta too. Be aware that beta is not really a term associated with options positions, I think the issue youâre having in communications is that youâve selected buzz words or phrases which donât actually apply in your case. Entertaining dialog though its off topic from the question posed by the original poster.
You mean scalability right? Economies of Scale would mean "bigger the better". Unfortunately I cannot come up with a better word than beta, the idea of which forms a crucial part of my trading philosophy. If I am making many bets where I think the risk/return tradeoff is favourable, the idea of what I am calling beta, is crucial for overall risk management. Without it, through action or inaction, I can be levered into a dangerously long or dangerously short position.
The phrase "Economies of scale" does not mean bigger is better, far from it. You're using the term "beta" in a context for which is it not applicable.
Did you not want to use the phrase "diseconomies of scale"? I think thats what you were eluding to. For all intents and purposes, bigger the better does describe economies of scale. If beta is not applicable for a term that describes how the account moves with the market, what would be a better term?