Using Options To Protect a Large Portfolio

Discussion in 'Options' started by LaxFan, Dec 25, 2019.

  1. Daal

    Daal

    I could if I had the data but I havent found it anywhere. I mean, long-term data (going back to the 20s). Gold is sorta similar due being a real asset and being protected against inflation so it could be considered a proxy
     
    #61     Dec 27, 2019
    ironchef likes this.
  2. Matt_ORATS

    Matt_ORATS Sponsor

    Using portfolioanalyzer.com with a free account, you can run analyses back to 2007 with REITS, gold, commodities and more. As below, the drawdowns are substantial.
    [​IMG]
    https://gyazo.com/18bfe0e30aff92a042b32b7839f7d017
     
    #62     Dec 27, 2019
    nooby_mcnoob likes this.
  3. Matt_ORATS

    Matt_ORATS Sponsor

    The best combination of long puts and long SPY is below. The long put strategies are over-hedging with WOTM long-term and under-hedging with OTM short-term puts.
    This combination had a drawdown of 17%, annualized returns of 7.5%, Sharpe of 0.76.
    For comparison, SPY had a drawdown of 60%, annualized returns of 10% and a Sharpe of 0.72 from 2007 to present.
    [​IMG]
    https://gyazo.com/b7474c5ae2eae35aa7210779c111791e
     
    #63     Dec 27, 2019
    nooby_mcnoob likes this.
  4. No free lunch.
     
    #64     Dec 27, 2019
  5. ironchef

    ironchef

    How is it compared to the CBOE PUT (put-write index)?
     
    #65     Dec 28, 2019
  6. With that time horizon - btfd seems a better strat than $ cost averaging.
    But you have to wait longer. You can also wait until there's a big drawdown, then sell ATM puts when vol is high - it goes up a LOT during a drawdown. Then you collect either a high premium, or you get in a much better price, depending on whether SPY ends up ITM or OTM.

    So every time there's a strong dip (2%+ I'd guess), you sell 2-5 ATM puts for your budget on SPY. Month out should be about right. You'll probably only get assigned once a year, I'd guess.
     
    #66     Dec 28, 2019
  7. Matt_ORATS

    Matt_ORATS Sponsor

    Ironchef
    It compares favorably. Return is better. Volatility is lower. Risk is much less.
    If anyone is interested I can put a risk slide together.
    [​IMG]
    https://gyazo.com/0130c6f405b5bd1ce61d28923ba24eef
     
    #67     Dec 28, 2019
  8. yc47ib

    yc47ib

    I hate to say this, but I totally agree! Disclosure: I have some short positions on all indices set up during the last week averaged up.
     
    #68     Dec 29, 2019