PMTS

WEEK 73

Brokers Statement
Portfolio
Transcript

Timestamps
What Happened Last Week – 00:09
What’s Happening Next Week – 3:30
2 Gray Beards Poll – 8:47
Nick’s Update – 11:57

28 Responses

  1. I know this would entail more work for you guys and you are funding this with real money, but would you consider splitting the portfolio into 2. One could be geared for utilizing option plays. And the other not use any options for investors like myself that never really use options or have the account size to do so.

    Thanks for the consideration.

    1. I had similar first thought too. Additional cost could be mitigated by creating a paper IBKR account that picks up this current portfolio at the date of the increase and running the parallel non-option plays in it perhaps?

  2. Actually, if thinking about increasing portfolio size a separate Options tracking may be a fine idea. Definitely appreciate the use of Options in your deliberations/changes.

  3. It would be great to have options in the portfolio. You guys are great. I appreciate your work. You’re offering a service which is very helpful and needed. Thank you

  4. Since the upside appears limited, how do feel about selling further out of the money calls on the SPY calls to lock in some of the gains?

  7. Can you explain TUA for us? Match interest rate sensitivity of a 7-10y duration, but tied to 2y interest rates? 5.27% yield. What “yield curve efficiencies” are being harvested? Explain how this etf benefits or is hurt by “the roll”. How would this change with the slope of the yield curve?

  8. If you are willing, I imagine 2 managed portfolios would cover the majority of the subscribers…
    1. Similar to current 2GB portfolio without options
    2. Whatever asset size is needed to sufficiently enable the appropriate options tactics.

    Also, I think there is a 2GB segment of subscribers with multiple accounts of varying size and restrictions who will use both models.

    Providing both vanilla and overlay portfolios will convey a spectrum of tactics that should alleviate some of the implementation questions that arise.

    Thx for asking for input.

    1. While I appreciate everyone’s vote for a two portfolio solution, wouldn’t it suffice to increase the AUM to whatever’s necessary to fully use the option spectrum while ensuring they always offer a non-option alternative?

      1. That seems more practical for me too. Besides, they made it clear that the main goal is to help understand the what and why – the portfolio being illustrative of those views -, while a client’s position sizes and risk tolerance can vary widely.
        I suppose that if a client is retail and doesn’t have experience or a grasp of these matters, they can simply follow it perfectly and feel safe to know they have defensive, balanced portfolio allocations. If not, it’s their capital to deploy according to their best judgement and expectations.

        Also, Nick generally advises what the alternative is for people that won’t be using options. I’d prefer the current AUM because it’s closer to my own portfolio size, but as long as a larger AUM with more complex options goes along with short alternative commentary for people that don’t use options, I’d be good with that.

  11. Thank you for asking for our opinions on increasing portfolio size to use options strategies. It would be great for both ppl who want to have a more vanilla portfolio and who want to overlay with options to be able to use your resources effectively. I vote for two portfolios. Ppl with a vanilla portfolio can also benefit from your explanation on why u use those options. As their portfolios and sophistication grow, some will adopt your portfolio with options.

  13. I understand that options give an edge but they’re risky as well. Of course you guys decide how to manage your product but I’m in the camp of separating options from a regular long only portfolio. Right now, your oprions play on SPY cannot compare to anything without options, so I would really like the equivalent of the play, because being 35% long on SPY or 0% long on SPY are both sub optimal. Thank you.

    1. Options are less risky than the underlying. You know exactly how much you are risking, unlike with the underlying. There is no “equivalent” play without options. The whole point is to switch to options when their pricing is cheap and to have the underlying when it is not. But we understand now that some people will not employ options whatever the situation, for a variety of reasons, and will try to adjust our offering.

  14. The basic consensus, if there is one (results are 50-50 for keeping as is and increasing), is that some people want the basic long only, no frills, no options (for whatever reason); while others want the frills, which only a higher AUM enables. Seems the only way to provide both is to have 2 separate offerings. The problem is that the “frills” necessarily involve a more active style. I wonder if the people who voted for it understand that? There necessarily will be more email updates and more trading/limit orders, etc. A more active style necessitates more activity and that does not happen without more active involvement from the account holders.

    1. What I am looking for is the best approach for 2GB to meet their published portfolio goals.

      Options can be used to improve the probability of success.

      My observation from my 6 months with 2GB, is that portfolio changes are made in response to the facts changing, not based on speculation as to how they may change. So, when the facts change, we want to respond. Options provide a broader spectrum of potential responses. In my time with 2GB, all of the options trades Andy / Nick have proposed are a reduction of risk consistent with the market view at the time.

      So, it seems to me the options-enabled portfolio is the best attempt to meet the stated portfolio goals — and, yes, options require education, and a certain amount of capital, and a certain amount of active management. A simpler options-free portfolio is the next best effort — not as precisely managed as the options-enabled version, but accommodating of less funds and / or less time and / or an aversion to options.

      ==================

      FWIW — for those interested in options education, consider the vast free archive of materials at tastylive.com. Every options 2GB has proposed is a method fully explained at tastylive.

      1. Great response Mike. I agree with your views from my time with 2GB so far. The option strategies have both reduced risk and captured premium when volatility warranted it.

        To your question Nick, I’d definitely be okay with a more active portfolio management style when increasing AUM and using options more actively. I personally would consider this greatly educational and have confidence that your employment of such strategies would benefit the risk adjusted return of the portfolio.

  15. Hi Nick,
    “A more active style necessitates more activity and that does not happen without more active involvement from the account holders.” Fine by me but you might want to check that with another survey.
    Best, Olivier.

  17. Looks like XLK allocation would’ve gone up to 10% on today’s fall.

    For what it’s worth I’m behind on the portfolio moves (due to personal business and travel) and haven’t even converted my stock to SPY options yet, but I still prefer the info and learning that comes from seeing how you use options to reduce risk. Sometimes I catch up at a better price and sometimes I catch up at a worse price, which is fine because I understand what you’re trying to accomplish.

  18. I’d like to make a request for an explainer video regarding smaller contract size options contracts, like XSP (CBOE’s SPX minis) or MES (CME’s micro e-minis). It may enable earlier access to options as a portfolio management tool and more precise risk management. I’d be particularly interested in understanding the merits and detriments of both products, cost and how to manage each. Thanks!

    1. Ah I actually discovered that the notional size of XSP contracts are equal to SPY options. So there’s little benefit to using those except for them being European style and cash-exercised.

      1. Yes, we discussed this some episodes back and I tried to explain that it was actually the same after all tagging you on a Twitter post, but I guess you didn’t see it.

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