Black swan resilience

Hi Karl, both of my strategies hold only volatility related products. I used to have small bond and gold positions as a partial volatility hedge, but have eliminated those after IB changed their margin requirements. Thanks, David.

David, don’t be smart with me. That is the majority of people on this platform, and you know it. I’m your competition, we all understand. Yes - if you really want to be able to INTRADAY and END OF DAY hedge your systems, then you should be able to get predetermined max pain levels from the traders. I can give these levels, no problem. Edit: good for you if you are hedging into the close, you would be in the 1 percentile. There are a ton of traders here claiming they are systematic, and they are not. I have asked around looking for programs myself. If the trader cannot give predetermined max pain levels, they are frauds. Plain and simple.

Hi David,
When I said “I meant to find a way to hedge your other long stock related assets” I did not mean assets from your system but I meant other assets a subscriber might have in his portfolio of different systems, in other words I try to find some sort of global hedge for the subscriber who trades many different systems as I do. You know that I value your systems since I trade one of them because you are one of the few who at least partially hedge their volatility position. I refuse to subscribe to any volatility system which does not at least partially hedges its position.

People literally do not understand. They will get smoked out badly if they follow the majority of the leaders shorting volatility. I’m just here to help people out. It’s possible in these circumstances to owe the broker more than is in the account. I shouldn’t have to deal with this for bringing that up.


Thanks for declaring the option seller problems on black swan evenhts. You will never see a black swan coming. Thats the definition of a black swan event. So rocket man will not cause a black swan event cause everyone is aware of this. A black swan event comes out of nowhere and the Option seller like me can get real trouble cause you cant trade for some hours cause of this illiquidy or you have huge huge spreads. On the other side a bear market like 2008 is good for option sellers cause the volatility increases there.
Against rocket man gold will help while in the flash crash on august 2015 gold havent moved and gold miners have gone down.
So there can be huge differences on all different type of events.

At least options trade now with skew. So Black Monday was a good thing for option sellers :slight_smile:

Anything like this is not professional. The trades need to be synthetically hedged. Options do not do the trick, and if you hedge with options into every close, the hedge costs too much due to spread costs. It has to be synthetically hedged into the close with cash, or overinght with futures. Needless to say, the only program i synthetically hedged 100% yesterday was my volatility program - which is why there was no DD and we are up very slightly.

also rocket man could indeed do this if it occurs after hours, which it would probably do.

I wasnt talking about volatility products but options in general.
Stock options have this problem too but rocket man should only be a problem to volatility traders and not stock option sellers.

Also not true. They are correlated.

Thats true but depends on the style you trade. Selling way too much otm naked tesla puts and you are in real trouble. But with a diversified portfolio with some gold and silver in it im not too concerned about this possible event.
The difference is that on this geopolitical events gold is a quite good hedge.

I just looked at your programs.

Can you give me any examples of where you hedge?

I dont really hedge. My only hedge is some gold. My strategy is to keep enough of the margin aside to be able to handle this kind of events and sell only puts in an amount i can afford to buy. So my main concern is to survive the period of illiquity without a margin call at the worst time. On this period i can sell my gold or close a commotity trade to increase my margin. And normally i have long and short positions. So this positions will tend to hedge against each other.

I have no clue of the volatility trades but i guess this kind of trades will explode much faster on the margin requirements on such an event.

What i wanted to say is you will need very different hedging strategies depending on your strategiy and the kind of event you want to protect against.
With a diversified portfolio you can also make your portfolio vega neutral if you want.

Thank you for that information.

You dont need hedging with the right risk management. But you will definetly need one of this two options.
I prefer to balance my portfolio manually. Yeah i could also simply hedge the portfolio with buying volatility and it will be even safer but will also cost you some performance overall.

This isn’t true if you hold overnight.

When you have only long stocks you will maybe lose 20% on such a day but with a hedge over and over again you will lose more money over the whole time. And when you still have some funds left to rebuy stocks after such an event you will maybe even make profit out of such events.

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Thank you for that information.

Many of the systems I’m sub to have not been trading lately as they expect a market drop. At what point do creators have to except the fact the market may continue up. We are missing out on a lot of gains lately.

Not with my system, we are long here, and short here, and spread here.