Best and Worst $100k+ Portfolio Strategies: Building a Large Portfolio
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- Опубліковано 6 вер 2024
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When you are getting advice on portfolio management from Tom Sosnoff including his current bias you couldn’t ask for more! No other trading platform provides you with this level of ‘grey beard’ mentoring. 30 years of Wall Street in 8 slides. Just brilliant!
Great stuff. Clearly I’m taking on too much risk with my portfolio. Up and down monthly swings of about 6-9% currently. Good to get some ballpark figures to show when you may be over or under leveraged.
So glad y'all are bringing back this series - I think y'all should promote it more and mention it more after it's complete, the last top dogs course really helped me a ton and took my trading to the next level - but I could have used the information months earlier, but I just didn't come across it until more recently.
Regardless great stuff 👍
Risk management is the most important thing in the market because thats the thing you control the most.
There are 2 rules in life: Don’t fight the FED and don’t argue with Tom!
sad, if people feel the oil is too big means that is not, because you just depend on experience
We're doomed if Tom ever works at the FED
the weakness currency are showing the energy price will be strong,
so may say oil corporation will be the rising star in the future.
by the way some people may lucky enough to pass a month by high premium received from selling call options,,,
Damn … ease up on Tony Tom … it’s Sunday. He’s just clarifying for us what we need to know as newbies. Y’all are a great team
Why are the other four videos hidden? It would be very useful for others to reference!
Love this series. If you want to target a 20% annual return using mechanics that capture 25% of theta, you’ll need around 1 theta per $420 in buying power. Here they are getting just above that without exceeding 50% bp usage.
Keep in mind these tactics/assumptions are conservative, if you have the direction right you can, from what I've seen from others, achieve 50% - 80%+ annualized returns - which is what I'm attempting right now.
@@greeneryfinancial How has your work on getting that level of return worked out, so far?
Great information! Please consider extending the management of the portfolio for a few weeks. I think it would be beneficial to some of us
Not to shill, but if you want to follow/see the performance of this in the long-term I'm documenting this in a larger account on an indefinite basis every 2 weeks. The videos will just be me covering a financial topic before giving an update on the portfolio, and I'm including the full brokerage statements with all trades and the like.
I'm using the same strategy/methodology, with one exception - that I hold an outsized position in cryptocurrencies, as they're high premium and they're a sector I understand quite well and believe I have an extra edge in. Beyond that it's the same, core positions, a small options-trading portfolio, beta-weighted delta hedging, hedge fundie type stuff.
Really wish Tom would do a similar thing, as truth be told I'll likely make lots of mistakes, as while I've traded options for 5+ years that's nothing compared to him, especially being new to these tactics and portfolio margin.
Finally the video I've been looking for...excellent, excellent, EXCELLENT content. While I don't fully understand it all yet, I will! :) I appreciate all you do for the investing community...keep up the great work! 👍👍👍
That was gold. I'm looking forward to viewing the other videos in the series.
Love it... it is a 3d series for the past 10 yeras.. Hovewer I would take opposite side of their directional trades...Lol
Why duch a high BPR of 50%? This doesnt jive with the guidance of The Unlucky Investor's Guide / TT analyst research.
Great stuff. I would love to see more of this series and continuation of P&L on the demo portfolio
What would be interesting is to have a walkthrough on how this has changed. This video from Aug 22 is bullish on spy, bearish on dollar. So how did it actually play out in last few months? What adjustments were made to keep up?
What's an easy way to figure out the correlation index?
I love these theoretical studies. They're very helpful and packed with info.!
Love this series, thanks guys!
Tom and Tony. I studied each part of the lesson. My questions are: 1. When do you roll? Such 15 days before expiration? Or, when 50% profit is achieved? 2. Could these positions be reversed with similar results given it is an indifferent portfolio play? 3. Your assumption is bearish on USD. Suppose you were bullish instead. It seems to me that is matter not relevant. But if it is relevant then what would be different?
Tom & Tony (tastytrade team) prefer to roll at 21DTE, or close positions when 50% of max profit (generally).
I prefer to let positions ride if profitable due to theta (position is profitable due to time decay rather than a spike in price in my favor), close at 50-60%~ if not due to theta, and roll subjectively depending on risk and assumption - generally 25-30DTE if concerned for downside risk, 10-15 if if my assumption is sideways, somewhere in the middle if my assumption is modestly bullish. Depends.
Reversing the positions can work, but as they're largely directional the results will be different to some degree. If you have poor assumptions in direction this type of core portfolio won't outperform significantly if at all.
I was bullish the USD during the time Tom made these videos to now (no longer bullish on dollars, neutral). You'd just flip the trade around from short puts to short calls, or short the futures + sell a put against it (my choice due to high-conviction at the time).
For beginners, I would add EEM (Emerging Markets), EFA (Developed Markets, GDX (Gold Miners), XBI/IBB (Biotech), and IYR ( Real Estate).
Excellent knowledge sharing guys,!
Very cool segment. I went looking for the other 4 in the series and they say that they are unavailable / hidden. Is there some way to make these available?
This would of been a great time to be bullish on SPY and QQQ
Ah. I have heard his legend from his students and at last the algorithm has brought sifu to me
cannot be a .30 correlation when fed raise rates and do QT - all these are risk assets dependent on liquidity their correlation in this current macro enviroment is closer to 1.
If it all crash like Harry Denton style, then I’m hosed. I’m up 30% since then June bottom. Buying things i wanted and selling puts on leveraged etfs
Bearish on the NASDAQ a year ago. Ahhh, hindsight!
Congrats to the awesome research team at Tastey.
Quick question related to trade small, trade often. I know your portfolio is a demo portfolio but I would like to know if you would trade more positions instead of multiple options per position if it would not be a demo portfolio. Is that position sizing normal for a trade small trade often portfolio?
These are not normal positions, but rather 'core positions.'
In large accounts generally, it's best to have a lower-risk hedged-directional portfolio like Tom did in these videos, very liquid underlinings that you understand - and then with the excess buying power you implement 'trade small trade often' mechanics to provide engagement and hopefully generate some small yield on top of the core portfolio.
Core position sizing 3% -> 10% NAV (account value) in BPR, trade small trade often positions 0.5% -> 3% NAV in BPR ideally. Core positions often get hedged (shorting euros but longing gold) to minimize the risk of larger position sizing.
Great idea !
Is it fair to say that Tom is basing some of his choices of product on his market outlook? I could totally imagine how an investor's skepticism about the continued bull run of tech reflects in the QQQ short calls. I also think shorting the dollar makes sense.
Does this portfolio strategy somehow reduce the risk of making discretionary, directional bets on market movements one thinks is likely?
Tom you mentioned that this portfolio represents true diversification. I believe to achieve true diversification the portfolio needs to be able to handle a crash and or a tail risk event. This portfolio does not look like it can as it is net short naked options.
Diversification in product ≠ diversification in strategy
@@BreakBomb Are we referencing strategy when we are talking about a total portfolio?
@@REALPLSHOWN I believe Tom was referencing more diversification of product in the video, but it should represent diversification of the portfolio relatively well as well as the portfolio Beta-weighted delta wise isn't heavily biased in one direction or the other - so in the event of a downturn the portfolio should be fine (imo).
I'm doing the same strategy (with different directional assumptions) right now on my channel and I explain the rationale behind my core positions, but truth be told I've not been doing this strategy for long, however from blowing up my account many times before this seems extraordinarily safe and takes out the majority of risk - with the exception of directional risk.
You boil out the other risks of the portfolio, largely, and are left with a short volatility/theta portfolio that has individual directional potential, which may result in horrible underperform, or outperformance, depending on understanding and correct biases.
The only tail-risk I can see is if there's a 4x+ expected move in the timeframe and you fail to manage the positions or de-risk mid event, AND have the wrong directional bias (short/long b-weighted deltas, wrong individual equity biases).
To be clear that means the S&P 500 would have to go from 430~ today to 300~ in around 66 days, without management, to risk blowing up the account once accounting for NLV losses + nearly a doubling of buying-power requirement.
When running the risk calculations if my portfolio of 160k using this strategy was unmanaged during a 30% drop in the next 7 days only 24% is at risk, assuming the correlation is the same as historically, and a 10% loss in the next 1 week (more realistic in a black swan event, such as 2020) with no management the gain/loss is projected to be +/- 2%.
I'd argue that means this strategy is portfolio-wide diversified to an adequate degree - however, as we all know, there's no free lunch. Those figures are only for Beta-weighted deltas, and your equities can perform differently than historically, and if your assumption is wrong you'll get rinsed doing this.
@@greeneryfinancial Thanks for your insight. One thing that tends to be underestimated in a crash is the effect of Vomma (Second order greek) which in simple terms is the exponential move of vega. The portfolio may show good risk management through mathematical theory with models but these theories don't properly take Vomma into account. The best way to truly know if the portfolio can handle a crash like March 2020 would be to create it and back test it through March 2020. I think the ability to adjust in a crash is overrated. Look at Jim Schultz. He was the only tastytrade portfolio I could get numbers on during March of 2020. His portfolio drew down 50% and that is what I consider unrecoverable as it will take a 100% return to get back to even. You can see Jim's crash results on my channel under tastytrade review.
@@REALPLSHOWN Yes that's the main issue with this strategy, the only way to really backtest it, as it's subjective and directional, is to arbitrarily go back and make picks, however it's hard to say you would or wouldn't decide oil is ridiculously cheap and sell a short put, and get your face torn off - as well as personally I knew about covid and understood it to be disastrous in January, so my bias would say I would have leaned short as I did back then, however there's no way to remove the bias of hindsight from the backtest regardless - as how short would I have been?
I was mad short, but largely gave up as I was getting cooked doing downside-biased verticle spreads, resulting in me closing most of it before the big crash, would I have done differently if opting for the strategies that I am now? I'd like to say so, that I've learned something, but there's no telling for sure.
This is why I'd say this strategy isn't for everyone, or even most people, as you have to be directionally right - and there's no real way to backtest it. If you lack adequate understanding of risk, or simply are wrong in your assumptions you'll get wrecked.
I'll check out your video on it, but I'd reckon he had no 'core portfolio' that was long-short, but rather was simply 'trading small and often' short premium strategies with no direction, I'm curious if my assumption is correct.
Excellent.
Why do you have to come up with a directional bias when there are very good non directional strategies?
I'd argue the market is relatively efficient in pricing risk during non-sigma/black-swan events, and thus without a directional bias you have little material way to generate an edge in your advantage, or disadvantage, and thus are largely doomed to collecting the slight overstatement of risk + the risk-free rate if selling strictly non-directionally, and worse-yet during black-swan type events you have extreme downside risk as every position is at-risk to the downside, rather than only a portion of your positions, ideally around half, that you have a bearish assumption towards.
In fact that is my question too. Tom's overall portfolio delta is +290 (indicates bullish portfolio). Would you build a portfolio with zero delta given there is so much FED uncertainty? What non-directional strategies you are referring to?
@@subypal With large portfolios designed like this series is designing it delta-hedging is a bit different and generally shouldn't be taken as 100% face-value.
The main reason for this is when trading commodities, or to an extend currencies, their delta-weighting can be skewed and not relevant in actually making a portfolio delta-neutral in practice. This is because something like corn WILL move intraday in some cases, such as with big inflation prints or liquidity-crunches, similar to the market, giving it correlation - but overall the actual correlation is often much lower than the beta-weighted delta suggests as such commodities run almost entirely on supply/demand and fundamentals rather than fears of rate hikes and the like.
Similarly oil moves down when the market declines, in some cases, but that correlation disappears when inflation picks up and its almost completely thrown out of the window anytime OPEC makes an announcement.
Beta-weighted hedging is very useful, particularly on a strategy/assumption level or asset-class level, but it portfolio wide it isn't 100% reliable and shouldn't always be taken at face value like most individual greeks can be.
@@subypal It really depends on your assumption how you target the beta-weighted delta of the portfolio or certain portions of it.
I prefer to be slightly long deltas on individual stock options in most cases, neutral for ETFs (or long-short), but neutral or directional for commodities and currencies and largely ignoring the deltas, but just considering how the position will likely move in relation to the portfolio (shortEUR-longUSD will generally be in profit during market downmoves).
Non-directional strategies imo are short strangles, iron condors, etc. I wouldn't say short-long is non-directional, but rather neutral - as the positions are directional, but their combination makes directional-profits in the position possible even though the combined position is net-net non-directional when balancing for correlations + volatility.
Right now I don't focus much on the FED for the most part - there's bigger issues in the market right now that they can't change - such as oil/energy pricing, bad/good crops in commodities, general currency issues in Europe, etc.
@@greeneryfinancial Just because a portfolio is delta nuetral does not mean it does not carry directional risk. The key to being non directional is being gamma nuetral. I have developed a trade plan that is focused on being gamma nuetral and is non directional.
I don't see how you can earn $2250 premium on $4366 Buying Power on that 30 delta Euro position. What am I missing?
Euro futures (and most currency futures) have VERY low buying power as the currencies are generally not volatile at all - however they have high premium due to swift quick moves when moves occur, as well as the relative carrying cost in many cases of the position.
I have the opposite position more or less to Tom, short the futures short a 1.05 put, and the buying power reduction is a bit less, premium was $1600~ or so when I placed the trade I believe.
been waiting for this content for a long time. The last video i could on large portfolios was top dog series but thats at least 6 year old. Please do more of these for larger accounts with portfolio margin. @tastytrade
Great ..thank u
T&T thanks for sharing the secret sauce!
Where are the other videos of the series???
Great stuff.
1. Am so glad I understood this..every single detail, a testament to my trading journey (8 years). 2. I would bet againt you Tom...with 100% of my buying power😂
Too much hedging go on here...thanks for the work though...very cool to see others perspectives
$100,000 is a smaller portfolio?
Huge sovereign risk with Chinese equities.
This is a great video! But I am still not understanding it clearly.
Just buy and sell Tesla options.
Bullish on S&P, Euro and BTC.
Bearish on oil.
How to lose money: a practical guide
While I agree, I disagree with most of his positions, the great thing about this strategy is that he'll probably come out breaking even at the very least. Personally I'm bullish BTC, Bearish Euro, Long Wheat, Short Housing, Neutral Corn, Long Gold. 🙏
@@greeneryfinancial I’m bullish on commodities, especially energy and bearish everything else. We haven’t even made a dent in inflation. Rates got barely increased and the market almost imploded, imagine what would happen if we were fighting inflation for real.
@@Quado0s Even raw materials (lumber/metals)? Those commodities imo lack upside catalysts, as while inflation should bring them up their demand is likely to fall off a cliff as the recession becomes undeniable.
Shifting my thoughts to be a bit less bullish on corn as crop harvests have been GREATER than they should have been, some of the largest ever recorded, despite the fertilizer + ukraine issues. Moving from the 20-30Delta covered option position to the 30-40~.
Do agree oil/energy should be up up and away though, albeit maybe not a new ATH until at least December, as there's no real demand squasher and supply isn't exploding to the upside (yet). I doubt a recession will hurt demand significantly, until there's blood flooding the streets.
Inflation is tough as I'm a perma-bull on inflation going higher, but unless energy really goes up way past it's ATH it's becoming harder for me to rationalize it increasing rn with the recession + lack of printing (relative), although I think it'll still happen come 2023 I think we may be more or less flat 6% - 10% inflation figures and only see an increase once the recession is in full swing and money begins to be handed out.
@@Quado0s By the way if you aren't familiar with the channel I'd recommend checking out 'Grain Markets and Other Stuff' best commodities/futures channel I've found - keeps you up to date with the news and key numbers.
@@greeneryfinancial I’m sticking to broad commodity ETFs as I can’t be an expert on 15 commodities, knowing if a dip in lumber or grain is buyable but you can’t go wrong with a diversified basket of goods that go up with inflation over time.
One exception is oil which I’m buying with both hands.
Thanks for the link, I will check it out!
Why not include futures?
They did: /6E
You are bearish oil? How come Tom?