Author Topic: 90% passive / 10% active, looking for ideas  (Read 4549 times)

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #50 on: November 22, 2021, 11:54:36 AM »

Buying VXX puts would be a good distraction from my portfolio.  But you don't buy bearish put spreads... you buy puts.  Do you buy them out of the money, and wait?
When I used to buy them, I would get the longest dated LEAP available and go 1/3 out of the money.  There was usually a nice gain when it reached at the money.  Every now and then, you'll get a crazy spike where VXX doubles or more.  It can be along wait before it is in the green again.  With the market so frothy, I'm out of the trade until the next major recession.
Oh, you weren't kidding.  For Jan 2024, ATM calls have a 13% bid-ask spread.  But puts are no better: buy the $25, sell the $20..  and you invest $505 to at most get $500 back.  I agree with staying away.

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Re: 90% passive / 10% active, looking for ideas
« Reply #51 on: November 22, 2021, 12:23:17 PM »

Buying VXX puts would be a good distraction from my portfolio.  But you don't buy bearish put spreads... you buy puts.  Do you buy them out of the money, and wait?
When I used to buy them, I would get the longest dated LEAP available and go 1/3 out of the money.  There was usually a nice gain when it reached at the money.  Every now and then, you'll get a crazy spike where VXX doubles or more.  It can be along wait before it is in the green again.  With the market so frothy, I'm out of the trade until the next major recession.
Oh, you weren't kidding.  For Jan 2024, ATM calls have a 13% bid-ask spread.  But puts are no better: buy the $25, sell the $20..  and you invest $505 to at most get $500 back.  I agree with staying away.

Another valid approach, if you keep position size small, is to do a synthetic short.  Use a combo limit order and be patient for favorable pricing.  I've successfully shorted the direct underlying on VXX.  Doing so on UVXY yields about 1 day a week during normal low vol with hard to borrow warnings from IB - not likely to be maintained through a vol spike.  It sort of works on VXX but the borrow fees are often punitive, thus the synthetic.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #52 on: November 22, 2021, 12:25:55 PM »
UPST, MQ, AMPL, HIMS, PYPL, FB, ROKU, PTON, BIGC, OPEN, BLND, TWLO, RNG, TDOC, AMZN.
Today MQ and BLND both lost 10%, with many others on this list losing more than 5%.  But I'm taking the opposite view as the market - I think months or years from now, today will seem like a good price to buy cloud computing stocks.

I sometimes divide a stock's 52 week high and low, to see how far it moves.  For example, Vanguard S&P 500 ETF moved 33.5% by that measure.  MQ scores 91.6% on that measure, with both high and low happening last month (June IPO).  I already knew it was a CNBC disruptor and had JP Morgan as a client.  Adding it all up, I decided to buy the stock today (MQ is currently $21.53/share).  It joins dozens of other individual stocks I bought this month.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #53 on: November 22, 2021, 12:55:23 PM »
Buying VXX puts ...  Do you buy them out of the money, and wait?
When I used to buy them, I would get the longest dated LEAP available and go 1/3 out of the money.  There was usually a nice gain when it reached at the money.  Every now and then, you'll get a crazy spike where VXX doubles or more.  It can be along wait before it is in the green again.  With the market so frothy, I'm out of the trade until the next major recession.
Oh, you weren't kidding.  For Jan 2024, ATM calls have a 13% bid-ask spread.  But puts are no better: buy the $25, sell the $20..  and you invest $505 to at most get $500 back.  I agree with staying away.
Another valid approach, if you keep position size small, is to do a synthetic short.  Use a combo limit order and be patient for favorable pricing.  I've successfully shorted the direct underlying on VXX.  Doing so on UVXY yields about 1 day a week during normal low vol with hard to borrow warnings from IB - not likely to be maintained through a vol spike.  It sort of works on VXX but the borrow fees are often punitive, thus the synthetic.
Oh, I see.  Jan 2024 sell the $21 call (+ $1040) and buy the $21 put (- $1220), so you spend $180 to short 100 shares for 26 months.  Roughly 4%/year, fixed.  I'm guessing that's a lot cheaper than punitive borrowing fees.

Let's say VXX spikes 5x and unlucky for me, the call is exercised.
$20.77/sh x 5 = $103.85/sh - $21 strike = $82.85, for a loss of $8285/100 sh contract.

That's a bit much - and with a stop-loss order to prevent it, regular volatility could trigger it.  I think this might be the advanced class where I don't belong.  :)

hodedofome

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Re: 90% passive / 10% active, looking for ideas
« Reply #54 on: November 23, 2021, 03:15:39 PM »
UPST, MQ, AMPL, HIMS, PYPL, FB, ROKU, PTON, BIGC, OPEN, BLND, TWLO, RNG, TDOC, AMZN.

Youíre welcome.
Thank you!  Although saying "You're welcome" in advance reminds me of the portrayal of Michael Burry in the Big Short.  My WCLD pick was inspired by your individual stock picks in cloud computing.  I wanted someone else to pick the stocks, since I don't feel comfortable knowing when to replace old entries with new ones.

Some questions about these picks:
(1) How many stocks do you change each year?
(2) SNOW is in WCLD, and I thought you held it before.  What did you see that caused you to drop it - or to exclude it now?
(3) Why Facebook (FB), aka Meta?

That list is surprisingly uncorrelated to my other picks.  I'll give my layperson analysis in a follow up post, since that's a long list of stock symbols.

Apologies, I don't check this forum often.

1) I have about 10 stocks in my core, but some of those have been getting freaking expensive lately so I've been selling - like NET, CRWD and ZS. I'd be happy to buy back in but they have to drop probably 30%+.
2) SNOW just got freaking expensive, but it's tanked this past week so getting interesting again. The company and CEO is a winner, just have to be selective on entries and exits. I'd be interested again at $325.
3) Facebook is a free cash flow machine, basically a monopoly on social networks, with a hefty buyback program. It's cheap relative to other tech peers because it's so hated by the public. Worthy of holding it for a while.

Since this post, AFRM has gotten a bit cheaper so you can add it to the list.

hodedofome

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Re: 90% passive / 10% active, looking for ideas
« Reply #55 on: November 23, 2021, 03:30:10 PM »
UPST, MQ, AMPL, HIMS, PYPL, FB, ROKU, PTON, BIGC, OPEN, BLND, TWLO, RNG, TDOC, AMZN.

@hodedofome - I looked at correlations between each of those and both QQQ and WCLD.  I looked at some brief information, and their price changes over 5 years (when available).  I've decided there's 6 I really want to buy, 3 I'm not sure what to do, and 5 more I don't plan on buying.  Could you help me understand the 3 where I'm on the fence?

My favorites, that I plan to buy:

Ringcentral(RNG) 5yr 10x, V-shaped recovery to May 2020 price
Amplitude(AMPL) Sept direct IPO, +50% slowly over 1.5 mo
OpenDoor Tech(OPEN) upswing, big market, market cap of Zillow
Roku (ROKU) spiked pre-pandemic; wait out post-Covid slide?
Blend Labs (BLND) July IPO, cloud banking, off 50% from IPO
Teledoc (TDOC) back to Feb 2020 price, expect more demand


Three companies where I may or may not buy them:

Twillo (TWLO) has been slowly declining over 12 months, in ups and downs.  Their 20 price/sales suggests they have room to drop further.  Why did they spike during Covid-19?  Are they worth 2.7x their pre-Covid price?

Peloton(PTON)... when I saw PTON on your list, I recalled hating it.  They have crashed to 1/3rd of their peak value, so maybe that dislike was correct.  Trying to take a fresh look, they have 4.1 price/sales, which impresses me.  Maybe they're oversold.  But they're up +87% since Feb 2020 ... is that justified?

[UPDATE: MQ is 0.94 correlated with GBTC, which is too highly correlated for me]
Marqeta (MQ) is a CNBC top 50 disruptor with JP Morgan and other clients.  That's impressive.  But they make credit cards... will they ($13B) actually have their own credit network competing with MasterCard ($345B)?  Maybe I need to separate their credit card making from their payment network, and dig in further.


And the 5 I don't plan on buying:

Upstart (UPST) 5x Lending Club(LC) cap, but LC 8x/yr.  Lose to LC?  okay correlation.
Bigcommerce (BIGC) Aug IPO, spike/drop, SaaS retail/not sticky?
PayPal (PYPL) 2x Covid spike, no moat, 1.6% of QQQ.  $237B ceiling
Hims & Hers Health(HIMS) spike then -67%, compete w/TDOC? empty/cute?
Amazon(AMZN) already 7.6% of QQQ, too much overlap.

Three companies where I may or may not buy them:

Twillo (TWLO) has been slowly declining over 12 months, in ups and downs.  Their 20 price/sales suggests they have room to drop further.  Why did they spike during Covid-19?  Are they worth 2.7x their pre-Covid price?

Twilio continues to grow revenues at 50%+ and are a best of breed communications platform as a service. It should be fine long term. All best of breed SAAS companies spiked during Covid as the world is going digital and SAAS is the technology to help us get there.

Peloton(PTON)... when I saw PTON on your list, I recalled hating it.  They have crashed to 1/3rd of their peak value, so maybe that dislike was correct.  Trying to take a fresh look, they have 4.1 price/sales, which impresses me.  Maybe they're oversold.  But they're up +87% since Feb 2020 ... is that justified?

Peloton sells a physical product and all physical products have supply chain issues right now. They were growing 100%/yr before Covid, grew like over 200% during Covid, and are having some mean reversion. I expect them to continue to grow strongly in the future. The future is a cross between The Jetsons and Wall-E. The Jetsons worked out at home, Peloton is the platform to bring that to reality.

[UPDATE: MQ is 0.94 correlated with GBTC, which is too highly correlated for me]
Marqeta (MQ) is a CNBC top 50 disruptor with JP Morgan and other clients.  That's impressive.  But they make credit cards... will they ($13B) actually have their own credit network competing with MasterCard ($345B)?  Maybe I need to separate their credit card making from their payment network, and dig in further.

Marqeta powers Affirm, Square, JPMorgan, Bill.com and quite a few others. I don't think they are competing with Mastercard, they are providing physical and virtual cards for all types of applications.


And the 5 I don't plan on buying:

Upstart (UPST) 5x Lending Club(LC) cap, but LC 8x/yr.  Lose to LC?  okay correlation. Lending Club wishes they could be doing what Upstart is doing. Lending Club has been in business for like 20 years while Upstart started like 6 or 7 years ago. Upstart already has more revenues than Lending Club and is growing at like 200%/yr.

Bigcommerce (BIGC) Aug IPO, spike/drop, SaaS retail/not sticky? BIGC may take some time but it appears that they will be taking Magento's (Adobe Commerce) market share. Adobe isn't putting the investment into Magento so BigCommerce is taking advantage of that. Basically, there's Shopify for small merchants as well as apparel of all sizes, but if you are really big, are B2B or want to customize/host it yourself, there's only BigCommerce or Magento. BigCommerce looks like it's the platform of choice now for those merchants. The e-Commerce world is more than large enough to handle a few players.

PayPal (PYPL) 2x Covid spike, no moat, 1.6% of QQQ.  $237B ceiling

Hims & Hers Health(HIMS) spike then -67%, compete w/TDOC? empty/cute?
I don't think they are competing directly with TDOC. HIMS is selling prescription meds directly by mail so you don't have to go do the doctor. TDOC is powering remote healthcare but they won't send you prescription meds in the mail.

Amazon(AMZN) already 7.6% of QQQ, too much overlap.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #56 on: November 24, 2021, 12:24:30 AM »
UPST, MQ, AMPL, HIMS, PYPL, FB, ROKU, PTON, BIGC, OPEN, BLND, TWLO, RNG, TDOC, AMZN.

@hodedofome - I looked at correlations between each of those and both QQQ and WCLD.  I looked at some brief information, and their price changes over 5 years (when available).  I've decided there's 6 I really want to buy, 3 I'm not sure what to do, and 5 more I don't plan on buying.  Could you help me understand the 3 where I'm on the fence?

My favorites, that I plan to buy:

Ringcentral(RNG) 5yr 10x, V-shaped recovery to May 2020 price
Amplitude(AMPL) Sept direct IPO, +50% slowly over 1.5 mo
OpenDoor Tech(OPEN) upswing, big market, market cap of Zillow
Roku (ROKU) spiked pre-pandemic; wait out post-Covid slide?
Blend Labs (BLND) July IPO, cloud banking, off 50% from IPO
Teledoc (TDOC) back to Feb 2020 price, expect more demand


Three companies where I may or may not buy them:

Twillo (TWLO) has been slowly declining over 12 months, in ups and downs.  Their 20 price/sales suggests they have room to drop further.  Why did they spike during Covid-19?  Are they worth 2.7x their pre-Covid price?

Peloton(PTON)... when I saw PTON on your list, I recalled hating it.  They have crashed to 1/3rd of their peak value, so maybe that dislike was correct.  Trying to take a fresh look, they have 4.1 price/sales, which impresses me.  Maybe they're oversold.  But they're up +87% since Feb 2020 ... is that justified?

[UPDATE: MQ is 0.94 correlated with GBTC, which is too highly correlated for me]
Marqeta (MQ) is a CNBC top 50 disruptor with JP Morgan and other clients.  That's impressive.  But they make credit cards... will they ($13B) actually have their own credit network competing with MasterCard ($345B)?  Maybe I need to separate their credit card making from their payment network, and dig in further.


And the 5 I don't plan on buying:

Upstart (UPST) 5x Lending Club(LC) cap, but LC 8x/yr.  Lose to LC?  okay correlation.
Bigcommerce (BIGC) Aug IPO, spike/drop, SaaS retail/not sticky?
PayPal (PYPL) 2x Covid spike, no moat, 1.6% of QQQ.  $237B ceiling
Hims & Hers Health(HIMS) spike then -67%, compete w/TDOC? empty/cute?
Amazon(AMZN) already 7.6% of QQQ, too much overlap.

Three companies where I may or may not buy them:

Twillo (TWLO) has been slowly declining over 12 months, in ups and downs.  Their 20 price/sales suggests they have room to drop further.  Why did they spike during Covid-19?  Are they worth 2.7x their pre-Covid price?

Twilio continues to grow revenues at 50%+ and are a best of breed communications platform as a service. It should be fine long term. All best of breed SAAS companies spiked during Covid as the world is going digital and SAAS is the technology to help us get there.

Peloton(PTON)... when I saw PTON on your list, I recalled hating it.  They have crashed to 1/3rd of their peak value, so maybe that dislike was correct.  Trying to take a fresh look, they have 4.1 price/sales, which impresses me.  Maybe they're oversold.  But they're up +87% since Feb 2020 ... is that justified?

Peloton sells a physical product and all physical products have supply chain issues right now. They were growing 100%/yr before Covid, grew like over 200% during Covid, and are having some mean reversion. I expect them to continue to grow strongly in the future. The future is a cross between The Jetsons and Wall-E. The Jetsons worked out at home, Peloton is the platform to bring that to reality.

[UPDATE: MQ is 0.94 correlated with GBTC, which is too highly correlated for me]
Marqeta (MQ) is a CNBC top 50 disruptor with JP Morgan and other clients.  That's impressive.  But they make credit cards... will they ($13B) actually have their own credit network competing with MasterCard ($345B)?  Maybe I need to separate their credit card making from their payment network, and dig in further.

Marqeta powers Affirm, Square, JPMorgan, Bill.com and quite a few others. I don't think they are competing with Mastercard, they are providing physical and virtual cards for all types of applications.


And the 5 I don't plan on buying:

Upstart (UPST) 5x Lending Club(LC) cap, but LC 8x/yr.  Lose to LC?  okay correlation. Lending Club wishes they could be doing what Upstart is doing. Lending Club has been in business for like 20 years while Upstart started like 6 or 7 years ago. Upstart already has more revenues than Lending Club and is growing at like 200%/yr.

Bigcommerce (BIGC) Aug IPO, spike/drop, SaaS retail/not sticky? BIGC may take some time but it appears that they will be taking Magento's (Adobe Commerce) market share. Adobe isn't putting the investment into Magento so BigCommerce is taking advantage of that. Basically, there's Shopify for small merchants as well as apparel of all sizes, but if you are really big, are B2B or want to customize/host it yourself, there's only BigCommerce or Magento. BigCommerce looks like it's the platform of choice now for those merchants. The e-Commerce world is more than large enough to handle a few players.

PayPal (PYPL) 2x Covid spike, no moat, 1.6% of QQQ.  $237B ceiling

Hims & Hers Health(HIMS) spike then -67%, compete w/TDOC? empty/cute?
I don't think they are competing directly with TDOC. HIMS is selling prescription meds directly by mail so you don't have to go do the doctor. TDOC is powering remote healthcare but they won't send you prescription meds in the mail.

Amazon(AMZN) already 7.6% of QQQ, too much overlap.
I read an amazing library book on active management, written by a professor turned hedge fund manager.  Highest quality discussion of active management I've seen, and the key takeaway was that more focused active investing beats less focused approaches.  So your active 10 stocks that you monitor frequently might be on to something.

I actually bought PTON and then realized their post-Covid spike wasn't done yet.  But I sold on the day when PTON spiked +12%, so I got out with a profit.  I think convenient, at home exercise classes with top instructors will make a comeback.

Apparently when looking at HIMS, I saw "telehealth" and skipped "sells drugs online".  That's a mistake on my part, I'll take another look.

Cloud stocks are taking a beating this week, and the claim is fears of inflation.  Next year will involve a rate hike, with a survey of Fed governors estimating a 50% chance for May.  And then increasingly higher chances after that.

See you next month. ;)

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #57 on: November 24, 2021, 02:21:03 PM »
UPST, MQ, AMPL, HIMS, PYPL, FB, ROKU, PTON, BIGC, OPEN, BLND, TWLO, RNG, TDOC, AMZN.
Today MQ and BLND both lost 10%, with many others on this list losing more than 5%.  But I'm taking the opposite view as the market - I think months or years from now, today will seem like a good price to buy cloud computing stocks.

I sometimes divide a stock's 52 week high and low, to see how far it moves.  For example, Vanguard S&P 500 ETF moved 33.5% by that measure.  MQ scores 91.6% on that measure, with both high and low happening last month (June IPO).  I already knew it was a CNBC disruptor and had JP Morgan as a client.  Adding it all up, I decided to buy the stock today (MQ is currently $21.53/share).  It joins dozens of other individual stocks I bought this month.
Today various stocks moved up 5%, including MQ up 9%.  Interest rate fears had investors selling growth stocks.  I'm glad that selling can be interrupted by a day of upswings.  It also shows me the volatility moves both ways - a stock that lost 10% can gain 9% soon afterwards.

I wound up buying HIMS.  They took a hit in Feb when all stay-at-home stocks took a hit, and again recently over interest rate fears.  But their quarterly revenue is up 74% from a year ago, while subscriptions almost doubled (+94%).  I think even without the lockdowns of a year ago, they are still growing rapidly.

While looking at insider ownership (an impressive 18.76%), I noticed two of the mutual funds holding HIMS seem to contradict each other:

Vanguard Small-Cap Growth Index Fund   0.44%
Vanguard Small Cap Value Index Fund   0.44%
https://finance.yahoo.com/quote/HIMS/holders?p=HIMS

hodedofome

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Re: 90% passive / 10% active, looking for ideas
« Reply #58 on: November 24, 2021, 08:57:57 PM »
Yeah HIMS is unique in that itís growing strongly but also pretty cheap. Of course, it can continue to get cheaper so manage risk accordingly. It may take some time for the market to figure out HIMS.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #59 on: November 25, 2021, 12:03:26 AM »
A good point about risk.  People might think HIMS is some percent of my portfolio - it's not.  It joins dozens of other stocks I've bought at the same weight, a fraction of a percent of my portfolio.

Back in 2020, I ran an experiment with Covid sensitive stocks, beaten up by lockdowns.  Sometimes good news would show up, and a number of these stocks would make a strong upward spike... then fade back down.  But it was enough to show me what would happen in a recovery.  That gave me confidence it was going to work.  The same thing here - the potential for high returns is there, I just need to wait 5-10 years to see if these and similar stocks will beat the market.

effigy98

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Re: 90% passive / 10% active, looking for ideas
« Reply #60 on: November 26, 2021, 10:27:13 AM »
VXX worked today up 20%. 401k rebalance. Again it is a hedge for days like today. BigErn covered the numbers and countless people on boggleheads, this is basically a lower volatile hedgefundie strat... 94% NTSX, 6% VXX. Tax sheltered account so you can rebalance.
« Last Edit: November 26, 2021, 10:29:18 AM by effigy98 »

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #61 on: November 27, 2021, 06:15:33 AM »
Putting that +20% in context, it's a +0% since early October, and -69% YTD.
https://finance.yahoo.com/quote/VXX/performance?p=VXX

I haven't seen any historical data showing VXX (or ^VIX) is a good investment to buy.  You can read about another poster who profited off puts as VXX fell.  I gather that VXX does not revert to the mean, and can keep losing by large amounts for years.

Normally when someone allocates 6% of their portfolio, they rebalance when it falls too far.  In the case of VXX, that would mean repeatedly selling other assets to bring VXX back up to 6% of the overall portfolio.  So it's not just the original investment losing 69%, but also buying into VXX again, which then falls.

effigy98

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Re: 90% passive / 10% active, looking for ideas
« Reply #62 on: November 30, 2021, 04:20:25 PM »
VXX again worked today.

Portfolio charts month to month rebalance (again do this in tax sheltered).
$16,541 NTSX 94%, VXX 6%, 17.23% CAGR, -7.07% Max Drawdown, Sharpe Ratio: 1.47
$17,426 NTSX 100%, 19.17% CAGR, -14.63% Max Drawdown, Sharpe Ratio: 1.11
$16,247 SPY 90%, AGG 10%, 16.56% CAGR, -17.31% Max Drawdown, Sharpe Ratio: 0.94

If you don't like seeing deep drawdowns and willing to reduce returns a bit, it is good insurance.
« Last Edit: November 30, 2021, 04:22:08 PM by effigy98 »

DaTrill

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Re: 90% passive / 10% active, looking for ideas
« Reply #63 on: November 30, 2021, 06:27:27 PM »
QQQ is a passive index, just a tech based index with relatively higher expense ratios.  SPYG, SCHG, FTEC are comparable with lower fees.  These are not active and subject to the same issues any SP index.  I would not invest in a managed fund as the expense ratios rarely/persistently pay for themselves.   

ChpBstrd

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Re: 90% passive / 10% active, looking for ideas
« Reply #64 on: November 30, 2021, 07:55:15 PM »
UVXY and SVXY are VIX futures funds. SVXY is UVXY's opposite. It makes money when VIX futures markets are in contango as normal, whereas UVXY gains when they are in backwardization, generally during a panic. Basically, ProShares pits investors in one theme against investors in the other, and charges a fee for the service.

You can view the current VIX futures market state of contango or backwardization at http://vixcentral.com/. Each fund rolls their futures contracts on a regular basis to maintain a constant duration. Thus, during contango, UVXY is constantly selling a cheaper asset to buy a more expensive asset. Meanwhile SVXY is constantly selling a more expensive asset to buy a cheaper asset. When the market flips to backwardization, though, these prices are reversed.

The pair is interesting to watch. SVXY tends to steadily pack on massive gains over the course of months - until getting utterly wiped out by bouts of volatility as occurred in 2018 and 2020. UVXY tends to steadily lose massive amounts of value until volatility strikes, and then it gains quickly before resuming its losses. UVXY is down 83% this year and that's AFTER increasing 27% in the past month. SVXY is up 35% this year and that's AFTER losing 13% in the past month.

There is a temptation to time the market for volatility. I.e. when volatility is spiking and SVXY is tanking, that's the time to go long SVXY and commit to hold it for 6 months or 25% whichever occurs faster. The options market treats all strike prices for these crazy funds as fairly likely, so you could sell covered calls along the way and get there quite quickly. For example, SVXY is $53.76 at the moment, and calls at the $60 strike expiring in just 32 days sell for around $1.02. So you could earn 1.9% from the call, which will only be exercised if SVXY goes up 11.6%, which is actually quite likely.

Theoretically, backwardization cannot last forever. This state of affairs is eventually arbitraged away through calendar spreads on futures contracts. So it's relatively certain that when VIX is in backwardization, it will eventually be in contango again. One can get a sense of the expected frequency of VIX explosions by looking at a chart of $VVIX.X - the volatility of the VIX itself.

Anyway, this sort of trade gamble is on my Walter White list, e.g. if I ever need to make 20% in a couple of months or die.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #65 on: December 01, 2021, 05:22:50 AM »
VXX again worked today.

Portfolio charts month to month rebalance (again do this in tax sheltered).
$16,541 NTSX 94%, VXX 6%, 17.23% CAGR, -7.07% Max Drawdown, Sharpe Ratio: 1.47
$17,426 NTSX 100%, 19.17% CAGR, -14.63% Max Drawdown, Sharpe Ratio: 1.11
$16,247 SPY 90%, AGG 10%, 16.56% CAGR, -17.31% Max Drawdown, Sharpe Ratio: 0.94

If you don't like seeing deep drawdowns and willing to reduce returns a bit, it is good insurance.
Even if someone agrees with you (which I don't), your two claims are inconsistent with each other.  A 6% allocation might "reduce returns a bit" with it's -67% performance, but at 6% allocation, it doesn't prevent "seeing deep drawdowns".

That said, I appreciate you posting a comparison of NTSX, NTSX + VXX, and a benchmark.  Over the past ~3 years, you show the mixture having a better Sharpe ratio, and some people have that as their goal.

But on the flip side, you only post when VXX goes up, and never about it dropping.  That's clear from your posts on Friday and Tuesday, which ignored Monday:

date --- open --- close
Nov 30: $23.49 -> $25.46
Nov 29: $23.16 -> $22.05
Nov 26: $22.97 -> $26.16

You failed to mention how much VXX fell on Monday, and that Tuesday's gains are actually represent a -2.7% loss since Friday's market close.  You are bragging when your investment has lost money.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #66 on: December 01, 2021, 05:40:12 AM »
QQQ is a passive index, just a tech based index with relatively higher expense ratios.  SPYG, SCHG, FTEC are comparable with lower fees.  These are not active and subject to the same issues any SP index.  I would not invest in a managed fund as the expense ratios rarely/persistently pay for themselves.   
SCHG (0.04%) is an excellent replacement for buying QQQ (0.20%) directly, with their top holdings matching closely.  I think I'll move some of my QQQ shares into SCHG, since they're so close together.

My larger QQQ holding is call options expiring Jan 2024 (in 3.1 years), while SCHG has a much smaller options market, offering at the latest July 2022 (0.7 years).  When later duration QQQ calls become available, I plan on buying those.

Fidelity MSCI Information Technology Index ETF (FTEC) follows the same index as Vanguard Technology (VGT), which I have disliked ever since they changed the index composition.  To MSCI, Amazon is not a tech company - it's in the consumer sector.  They also kicked out Google and Facebook, all of which I consider to be big tech companies.  That's why I prefer QQQ over VGT or FTEC.

For some reason SPYG doesn't show up clearly on Yahoo Finance, but Morningstar shows it has a long history and a 0.04% expense ratio.  It's options market is only out to June of next year.

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #67 on: December 01, 2021, 06:07:36 AM »
UVXY and SVXY are VIX futures funds. SVXY is UVXY's opposite. It makes money when VIX futures markets are in contango as normal, whereas UVXY gains when they are in backwardization, generally during a panic. Basically, ProShares pits investors in one theme against investors in the other, and charges a fee for the service.

You can view the current VIX futures market state of contango or backwardization at http://vixcentral.com/. Each fund rolls their futures contracts on a regular basis to maintain a constant duration. Thus, during contango, UVXY is constantly selling a cheaper asset to buy a more expensive asset. Meanwhile SVXY is constantly selling a more expensive asset to buy a cheaper asset. When the market flips to backwardization, though, these prices are reversed.

The pair is interesting to watch. SVXY tends to steadily pack on massive gains over the course of months - until getting utterly wiped out by bouts of volatility as occurred in 2018 and 2020. UVXY tends to steadily lose massive amounts of value until volatility strikes, and then it gains quickly before resuming its losses. UVXY is down 83% this year and that's AFTER increasing 27% in the past month. SVXY is up 35% this year and that's AFTER losing 13% in the past month.

There is a temptation to time the market for volatility. I.e. when volatility is spiking and SVXY is tanking, that's the time to go long SVXY and commit to hold it for 6 months or 25% whichever occurs faster. The options market treats all strike prices for these crazy funds as fairly likely, so you could sell covered calls along the way and get there quite quickly. For example, SVXY is $53.76 at the moment, and calls at the $60 strike expiring in just 32 days sell for around $1.02. So you could earn 1.9% from the call, which will only be exercised if SVXY goes up 11.6%, which is actually quite likely.

Theoretically, backwardization cannot last forever. This state of affairs is eventually arbitraged away through calendar spreads on futures contracts. So it's relatively certain that when VIX is in backwardization, it will eventually be in contango again. One can get a sense of the expected frequency of VIX explosions by looking at a chart of $VVIX.X - the volatility of the VIX itself.

Anyway, this sort of trade gamble is on my Walter White list, e.g. if I ever need to make 20% in a couple of months or die.
I assumed these 3 ETFs would have 1.00/-1.00 correlations to their index.  Instead I find all of them have less correlation to ^VIX than U.S. stocks have to emerging markets!  A pair of them (VXX, UVXY) have 1.00 correlations, but that's it.
https://www.portfoliovisualizer.com/asset-correlations?s=y&symbols=%5EVIX+VXX+SVXY+UVXY&timePeriod=2&tradingDays=60&months=36
IVV is S&P 500, EEM is emerging markets here:
https://www.portfoliovisualizer.com/asset-class-correlations

Something I've never seen before in Portfolio Visualizer happened when I plugged in UVXY (100% correlation to VVX).  The starting $10,000 went to $0.  If you plug in $1 million in 2012, you have $0.03 left now.  Over the 9 full years displayed by Yahoo Finance, it's median performance is -84.44%.  Half the performance was worse than -84.44%, and half better!  To me it's a stunningly strong example of something I don't want to own.

Selling covered calls means holding the underlying asset, which I'd like to avoid.  Wouldn't it be better to buy long-duration put options?
(No - I just looked, and $20 strike Jan 2024 put options for UVXY ($20.52/sh yesterday) cost $15!  Even going to zero, that's +33% in 2.1 years.  And since UVXY fell overnight, I'm sure it's even worse now.)

effigy98

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Re: 90% passive / 10% active, looking for ideas
« Reply #68 on: December 02, 2021, 10:28:17 AM »
You failed to mention how much VXX fell on Monday, and that Tuesday's gains are actually represent a -2.7% loss since Friday's market close.  You are bragging when your investment has lost money.

I rebalance at 5% bands personally, so if it drops 5% from my allocation, I will buy. I only care about my portfolio as a whole, not the individual assets... I see the assets as a tool to make better returns and reduce volatility. Personally I don't care what the assets are, they can be Bitcoin, Video Cards, Stocks, Bonds, whatever... I have more then NTSX and VXX, but the OP was asking for 90/10 and I was giving suggestions.

My best gain so far this year has been video cards... basically physical assets. 210% gain from when I bought them in 2016. I'm giving actual advice that has worked for me instead of trolling other people. If you want to call that bragging... whatever. This forum is so fucking toxic.
« Last Edit: December 02, 2021, 10:30:45 AM by effigy98 »

ChpBstrd

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Re: 90% passive / 10% active, looking for ideas
« Reply #69 on: December 02, 2021, 10:49:59 AM »
You failed to mention how much VXX fell on Monday, and that Tuesday's gains are actually represent a -2.7% loss since Friday's market close.  You are bragging when your investment has lost money.

I rebalance at 5% bands personally, so if it drops 5% from my allocation, I will buy. I only care about my portfolio as a whole, not the individual assets... I see the assets as a tool to make better returns and reduce volatility. Personally I don't care what the assets are, they can be Bitcoin, Video Cards, Stocks, Bonds, whatever... I have more then NTSX and VXX, but the OP was asking for 90/10 and I was giving suggestions.

My best gain so far this year has been video cards... basically physical assets. 210% gain from when I bought them in 2016. I'm giving actual advice that has worked for me instead of trolling other people. If you want to call that bragging... whatever. This forum is so fucking toxic.

By "video cards" do you mean like a desktop computer video/graphics card from Nvidia or AMD?

MustacheAndaHalf

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Re: 90% passive / 10% active, looking for ideas
« Reply #70 on: January 06, 2022, 05:57:29 AM »
I plan to return to this idea later, but I've sold almost all of my risky assets.  I had QQQ and 2x calls on QQQ, both sold.  I had various aggressive growth stocks, and have sold 50% of each allocation of those - hope to buy back later at lower prices.  Finally, I sold all of my crypto.

In 2022, I will not be trying to beat the market.  High stock valuations have pushed CAPE above 40, and we still have high inflation.  The Fed is more likely than ever to make another mistake - they already called inflation "transitory" for several months, and have been increasing their expected rate hikes monthly.  While studies suggest Omicron is milder, that doesn't make it the last variant we'll see.  What I see is lots of uncertainty, but the market retains very high valuations.

So everything could go well, and we get a decent year.  But the concerns I mentioned above suggest a higher than normal chance for a bad year.  Rather than wait to find out, I've sold my risky assets.  So most of the allocation I mentioned here is gone.  When valuations fall or crash, I'll take another look.

Note I still have about 3/4ths equity, so I'm not selling everything for fear of a crash.  I'm selling assets that do very badly during inflation (growth, crypto) so that I don't take extra risk in a risky year.