Travels and Trades

In mid December, I flew myself over to Vegas to play the WPT world championships. A relatively quick flight of about 1.2 hours. Took off from KVNY (Van Nuys) and landed KVGT (North Las Vegas). Took a video of the landing below

I started by playing the $1,100 to warm up. Busted pretty quickly in that and went over to the Virgin for a little card counting. What a nice room the Wynn has but they need one more conference area because the re-entry lines were insane.

My buddy ended up playing his first tournament at The Venetian and actually cashing. What a feat. During that we both had a day off so we went down to Fremont and did some counting and subsequently got kicked out of one casino 🙂 Fun times.

The main was a super deep 10k world championship event and ended up doing pretty well in it. Made a day 4 and got 115th out of 2,975 for a $32k score. I caught a brutal brutal sickness there that started to hit me day 4, and my bust out hand was on of the worst hands I played. I blame it on the sickness. Sucks because it was so damn deep and out of like 310 tables we were down to the final 14 or so. Really weighed on me for a week or so. I blew it! Having played like 35 hours relatively flawlessly to busting on a hand I’d generally never bust on. So close.

The hand was AKo in small blind, CO raised first in, I 3b and he calls

Flop JJTss (two spades)

I lead 1/5th pot and he calls

Turn Ad

I lead 4/5ths pot and he calls

River 2d I check he jams all in. I call.

I tank call thinking he has a lot of Ace X and the flush never made it, so he’d have som bluffs but none of this is what I’d normally be thinking or processing. I figured any jack would raise me on flop to deny equity to flush draws given the two spades on the board and the river A gives me top two. So I was thinking that he likely raises any jack except TJ, that he was on an ace or a draw that misses the river, I called the shove. Hate it.

He has all KQs. I three bet from sb and his calling range is all broadway suited which TJJA board hits all day long (every QJ,KJ,TJ,AJ,KQ broadway) beats me. It’s hard for any Ax to call the turn bet so I am beat almost always and he has no natural bluffs really. He’d also likely check down Ax

Flawed thinking from being sick. He had KQs and thats that.

The competition was pretty tough, all the best players in the world were there given it was a world championship so bagging day 2 was an accomplishment to me.

The start of day 2 we found ourselves sitting next to Igor Kurganov (well respected high stakes player) and found a double up against him. A table move had us over with relatively inexperienced players and stacked up through the day.

We found a bag for day 2 at 585k chips from 100k starting day 1.

On to day 3, the table was pretty damn talented so I didn’t have an easy time. Ended up 1.5x my stack for the Day 4. Their were a few dudes at the table that made jokes that I looked like a Euro Kevin Costner and both of them ended up becoming multi millionaires a few weeks later, go figure, apparently it was lucky to make fun of me! One ended up winning the entire tournament for 4.5mm and the other dude ended up winning a Pai-Gow jackpot (it was POSEV at the time) for 6.5mm. How weird.

Ended day 3 with 1.29mm and reached a peak of about 2.1mm early in day 4 before busting with my hand.

Stacking up 125 left!

Flew back home that day defeated, a bit sick and when I landed and got home it was game over. The worst sickness (worse than covid for me) that I’ve ever had. Two weeks of hell that I wouldn’t wish on my worst enemy. I got lucky though, I literally would not have been able to fly the plane even 5 hrs after that for like 2 weeks I was so sick.

Next tournament is a really big one. The PSPC and PCA in Bahamas in just a week. The PSPC is a 25k entry fee where they give away 500 or so seats to amateurs etc. It’s given away by a series of festivals, random pickings and events. Naturally all the pros flock to it making it almost like a Pro-Am. There’s no rake on it and it’ll be the biggest 25k ever done. Top 20% cash and get their money back so I am definitely going to play it. I’ll also be playing the PCA main plus the BSOP nationals. That’ll conclude poker travel until the world series in the summer.

I’ve been taking up mixed games which I am loving. The goal is to be fluent enough to play the 2-7 low ball triple draw, Razz, Omaha 8 and HORSE games in the WSOP. I don’t know how likely it will be to be good enough to play the 10ks but that’s the goal.

Peak had accelerated gains into the end of the new year and ended with 59% gross return. Was not expecting that. I thought like maybe we match 2021 or inch towards 50%. Nice ending to the year and a nice boost to the performance fees that we only get once a year 🙂

In 2020, we had a gross of 40% (extrapolated due to starting in April)

In 2021, we had a gross of 44%

in 2022, we had a gross of 59%

What a nice 3 year to start to setting up a fund. I was pretty nervous at the start, with all the eyes watching and the pressure of performance and managing other peoples money. It’s something that’s hard to explain. I mean, we’ve got an auditor (Grant Thornton) looking at us, we have our independent fund admins looking at us, we have our independent directors looking at us, and most importantly we have investor expectations (both reasonable and unreasonable) and we have to deal with this each and every reporting period. For a guy that’s always been in the top position, it’s kinda hard to answer to people 🙂 but whatever, I go on these calls as myself (you’re not getting me in a meeting wearing a suit or a sport coat, it’ll be designer t-shirts and hoodies, I’m good. The success and performance speaks for itself.

I’m often asked why I opted to manage other peoples money, because it really doesn’t add that much more % wise to my personal bottom line. But I feel like it’s worth it to have accountability, but most importantly, it’s creating a new pathway that can create unknown opportunities down the road, we’re creating reputation and a very complicated structure to allow for further expansion into other areas and trade types. We have no idea where it will lead and I think keeping that momentum is important because it’ll shape the future. One thing I didn’t expect was the weird (maybe because I am getting older) pleasure I am getting in actually feel like I am contributing to society in a positive way by helping our investors setup their retirements. It’s really cool to see their balances increasing and being part of the team that helped do that.

All of this formality initially did bring me some trading and performance stress 🙂 That said, the yearly mandatory zoom meetings with the auditors, directors and admins is kinda fun because we’re crushing it, it was especially fun this year when 95% of the funds they deal with are down or consider -10% a success. I even cheekily asked “So guys, tell me, what’s it been like dealing with all these accountability meetings with funds that are down 20%+? Is it awkward?” I shouldn’t say that. It isn’t easy having the responsibility and especially when I first started, there was definite stress and a larger than life expectation I had on myself to really make sure the systems were setup and we traded appropriately.

To tie this up, the thing I learned in my trading life is that the management of risk is the most paramount thing above returns. Manage that and the returns come. They come because what seemingly seems like an arithmetic loss (buying long puts for $5k a month let’s say) feels like you’re spending $5k but in reality and geometrically (multiplicatively) and over time (several time series) the draw downs it saves on events allow you to actually compound better. You’ll be surprised to know that buying those puts actually brings in a return over time. The most noticeable affects when I first started was occasional second guessing and just how often you triple check things but we have extra eyes and systems for that now. I also have a huge confidence in my team, the systems and myself.

All in all, a successful start and I feel like this year is actually our most important year as we pass the 3 year mark. Can we keep it up?

Peak is up about 44% YTD gross. We ended 2021 at the exact same number. We still have 25 days and I expect it to probably hit 47-50% to end the year. The year did start off pretty challenging but by May and onwards, the management was stressless and relatively straight forward. We were and are relatively indifferent to the swings of the market, and there were many, especially October. It was a lot of fun to watch the CPI releases and the whacky 5% moves in each direction and not really care. It’s interesting to note that direction doesn’t really matter in terms of how the portfolios perform. It is because of the setup of the systems and how these things mature together over time. The older trades mature and hedge off newer trades and we have diversification within the trades themselves including the tail positive exposure.

Our main concern or risk is when we move from a period of low volatility to a sudden shift to high volatility. Once in the regime, the trades are matured and setup in a way where direction of the market is not so important. Of course, we have to manage things and adjust risk but most of the time we don’t even know what market direction we prefer 🙂 If it screams up, we get the benefit of the vol crush but end up pretty stunted in potential return if it keeps going up, it taps out with a modest return if you will, but it’s easy and its a good modest return. if it screams down, we enjoy the activation of our convexity. If it grinds up, we’re walking it up with adjustments and trade initiations and benefiting from the volatility decline. If it grinds down, we’re enjoying the movement into our higher premium sections of the risk profile. All in all, relatively indifferent. It’s how it was designed. I don’t want to be beholden to market direction and I don’t want correlation to the broader market, especially now.

We’re now going into the end of the 3rd year of the funds existence and we’ve managed to produce similar returns to our backtests. Our “out of sample” match our “in sample” and despite 2021 being a very bullish year and a completely different environment than 2022, the years returns nearly match exactly. 44% and as of today 44%.

As usual, the focus is always on the reduction of risk through diversification, it is the series of returns that is most important to us. It is the multiplicative result of a series of results that matters the most, not the single edge or expected value of any trade. If you have a strategy that does 30% a year arithmetically but has a 50% draw down in year 5, it’ll do worse than a low variance portfolio that does 10% a year with no major drawdown multiplicatively. Our research continues to be on adding a trade type that compliments our systematic approach and that helps reduce the variance within the time series.

We decided to get out for a date night and took the Cirrus up to Lake Tahoe. From Van Nuys it was only about a 1.5 hour trip. We departed Van Nuys and did a pit stop in Camarillo for some fuel (both for the plane and ourselves). Camarillo has one of the best airport restaurants ever. In aviation, the best restaurants are at the airport. It’s a way to get people to fly for that $100 hamburger (the $100 is in relation to the gas it costs to fly there :)). It makes it fun to get out in the plane and try new restaurants. I’ve been intermittently fasting (one meal a day) for a bit but decided today was a day we could break the fast, after all, it was vacation date night/day. Lost like 15 pounds in 6 weeks doing it.

The flight to Camarillo is only about 8 min so it’s pretty quick up and down. We take-off, get handed off to Van Nuys departure and within a few minutes are talking to Camarillo tower arranging the landing sequence. The departure from Van Nuys can be pretty annoying sometimes, they’ll prioritize jets as they burn a lot on the ground. I was holding short and ready to go when the tower moved me to a corner so 3 jets could depart. They put baby in the corner. I totally could have taken off quickly and in time, so it was odd they did that. It caused delays and took us about 30 min from start to get airborne. Conversely, from Camarillo it takes about 5min. I’d love to get a hangar in Camarillo but it’s booked up for like 5 years. The only thing available is a shared one, I might consider it but I don’t know.

I’ve got a deposit down for the Vision jet and I have been on the list for 2 years but they’re telling me its going to be another 2 years..I’ll have to find hangar space that fits that thing. Everything from now until then is training and gathering experience for that.

Here’s a shot departing Camarillo

Flight was uneventful, we arrived and landed r/w 36 (which was an interesting approach given the mountain right in front of us). I had to kinda keep left then dive down for a controlled approach pretty quickly.

Once on the ground, we ordered an UBER to the hotel which was a short 15 min ride. Easy. The #Cirrus life I guess.

We just got some beers, hung out in the hotel and then got dinner. We ended with a bottle of champagne in the hotel room and that was that.

The next day was pretty cool, we had a massive tail wind and we got to see (from a distance) some sort of rocket launch. We left at 11 and were back around 12:15. Hard to get used that.

I ended up getting my IFR (instrument rating) in Canada and am working on the conversion in the US/FAA. I hope to have it all done by this week. In the next post, I flew from KVNY (LA) to CYYZ (Toronto) and back. Which was very interesting, and a great experience.

As of this writing, the fund is up about 27% for the year. We’re focusing mostly on campaign style complex OTM setups and left tail campaigns, however, we’re still doing opportunistic “ebb and flow” ATM trades as opportunities come up. The whipsaw environment provides for good opportunities.

We expect to end Q3 at about 40% given the timing, type and composition of the structures we’ve got on right now. They’re in a sweet spot with a load of room and much less gamma then we had in Q2 and Q1. This is assuming the market follows a similar volatility path as it has the last quarter. The goal is to end the year at about 55-60%. We surpassed 100% total returns sans fees the last quarter which represented 2 full years and 1 quarter.

The focus is always on reduction of volatility and risk to allow for better geometric returns and a focus on tail event risk mitigation. This is our main focus and how we approach trading.

It’s been a pretty standard quarter, no stress as we didn’t enter from a low to high vol environment like we did in Q1. Standard trades and standard setups. On the research front, we are looking at macro portfolio theories and concentrating on the writings of Spitznagel and Taleb but I think we’re just about fully absorbed with that information. We’re moving to setup a US facing feeder fund which is taking a lot of time, efforts and setup.

I just got back from the WSOP where I had spent a total of 3 weeks. It was a pretty decent successful trip though I did bust the main event on day 2 which always hurts the most. I don’t like my last play in the main as it wasn’t necessary given the length of levels. I had 28bb and squeeze shoved 99 from SB vs a raise and call from CO and BTN. The CO woke up with QQ and that was gg. I ended up with a 9th of 300 (a final table) in a Venetian event, a 204th of 4400 in the 800 deep stack, a 44th/1240 on the 3k NL and a 399th of 5702 on the Little one drop. My game was eons better than it was last year and I continue to study and study. I also played a Razz 1500 after minimal study just to get a feel for mixed games and because I just felt like trying something new (I’m sure it was a total punt). I plan on getting into mixed games and started studying Razz and 2-7 triple draw. I wanna be at a level where I can reasonably play tournaments in mixed by WSOP 2023. I’d love to find a coach for that.

On the travel front, I had a lot going on, I attempted to fly the plane from LA to Toronto early in June but we got stuck in Nebraska due to weather and turned around back to LV. I ended up playing a few tournaments and got that 44th, so it was a good consolation prize. We then hoped on a flight back to LA and I then drove the Urus from LA to Toronto with my two dogs and a buddy. We had two flat tires but other than that a smooth trip. We stopped in Utah, Colorado and Des Moines and made it back in 4 days. I spent a few weeks in Caledon at my house and then flew commercial back to LV for the WSOP main event. Then attempted to fly the plane back again (I still don’t have my IFR ticket) and hit weather in Chicago and had to leave the plane there until I can get back there.

Pictures of the Failed trip to Toronto

The first stop was Lake Powell and landed at the famous Page airport. What beautiful terrain.

Finally here is the start of the bad weather that forced us to turn around in the other direction.

Been a while!

Ended up finishing 2021 at 45% for the year. The year was relatively sub-par for the trading style so pretty happy with the result. This quarter has been very challenging, managing the whipsaw and the violent moves not to mention the volatility regime shift (always hurts when you go from low to high vol) but we pulled it off. With this new vol regime comes opportunity, as such I expect to close the quarter above 10%, not bad while the SPX is down -10-12%. Can’t complain. Along side of that, Q2 should be quite loaded as well since we’ll start it within a higher vol regime.

The plan was to remain systematic until a crash like event where we’d go discretionary and hands-on. I had shifted from systematic to discretionary on Jan 24th which brought about a lot more stress and workload and was as we learned today, completely unnecessary. We ran the systematic trading style through till today and had we remained systematic it would have done better and been 100x easier. So I am probably going to shift away from being discretionary during high vol events, at least as a main style. I just don’t see the point in muddying around if the systems work well. With this discretionary approach, I switched away from OTM as a focus and entered into ATM trades (using the ups and downs to form grand structures) but the whipsaw caught us a few times and that pro-longed bear rally run from Jan 24 bottom into mid Feb was quite challenging and stressful to manage as we had not fully encashed and we had removed several key components of risk in the OTM space. This market type gave us challenges on encasing the BSHs but we simply just delta managed those (roll and maintain delta) and we encashed based on that. This allows use to maintain some convexity regardless as we move forward.

April 1st will mark 2 years since I started the Peak Total Investment Fund SPC and we’ve managed to obtain around a 70% return which is great for 2 years. I expected and hoped for that result prior to launch, so having had 2 full years of out of sample (along with my 2 original years prior) and the fact that it aligns with expectations and testing is a testament. It hasn’t been an easy transition and as capital increases, it became more and more obvious the requirements for mandatory systems, back checks, and robust checklists. We’re developing ourselves more than we’re developing the trades.

All in all, what a ride the last 2 years have been. I love the markets and I love the game I get to play. It’s always a challenge and can be so rewarding. I also run a software company which has been in business for 20 years and involves over 40 people yet and it produces an awesome income/dividends but what 40 people can produce, I can do myself in front of a computer (for myself and other people). . That’s so insane. I guess that’s the reward of working hard on systems, back-testing and knowing yourself.

There’s two main aspects in the trading system/style that’s we’ve been developing. It’s what I (I think I stole the saying from Taleb), call being globally convex and locally concave. Breaking that down into the two parts, the two main parts of the trading portfolio.

The local concavity part represents our income portion. This portion has its main focus on risk reduction (a lowering of the volatility) by utilizing as much diversification as possible. We diversify by time of entry, type of trade, strike and naturally as it ages, by DTE. This gives us maximum diversification across the expirations and the option strikes. Older structures hedge off newer structures and so on. The income portion has 80+ entries per cycle. This gives us the best shot at having ability to have a low draw-down income campaign. It’s diversified by income type and by its hedging. By lowering the volatility tax we get better geometric returns and less draw-down and risk. The less time you spend recovering capital the more time and more capital is exposed to the supposed edge. Our income structures all have built in convexity (and this is different than our globally convex portion of the trading portfolio). This concavity structure, our income structure, has defined limited risk. It produces income and thus does have concavity but it is limited. It can be thought of as a rubber band that gets stretched, it can only get stretched so far until it snaps and the convexity of the built in black swan hedges are released. The amount of stretch represents the potential draw down (highest when you go from a low vol regime to a high vol) but that amount is dictated by time and as time goes on the maximum stretch goes down. For instance, the initial shock on our June structure through Jan 24 responds less and less to vol shocks now that we’re into March, in fact, it starts to act like a hedge. Having older and newer structures with different black swan locations and income locations give us a very smooth risk profile and limited ability for draw-down.

Our convexity structure is compromised of several parts including reactive and pro-active black swan hedging. It’s meant to provide return in market calamity above and beyond the income structure, acting as an additional hedge but also as a potential lotto for outsized returns. It’s also nuanced and diversified in its implementation.

Hence, we’re locally concave and globally convex and together all the parts provide us with reduced volatility within the portfolio allowing for better compounding (geometric returns) and less heart-ache, stress and better ability to action capital during market crashes due to the income provided by the black swan insurance.

Other than all that, on a personal side, I finally got the PPL, I flew back from Canada to LA and had done a few trips to Vegas and Arizona. Flying out of Van Nuys and into Vegas Class Bravo can be a bit overwhelming and intimidating but I got used to it. When I felt ready, I flew the family to Flagstaff Arizona which was a pretty cool 1st.

Then Ash and I went to Cayman for a week and saw friends we haven’t seen for a year. I think we might keep our house there now…it was way to nice (and fun) being back. We’re already planning our next trip in 10 days 🙂

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Been a while since I posted, but I guess that’s nothing new. Trading has been extremely boring this year because it’s become very systematic and mechanical in nature. The year to date return is approaching 34% and expectation is 40-45% by EOY given the theta levels in the account. Ideally, this huge up move slows down and gets back towards our tent. On the research side, I’m looking at a BSH factory type setup that’s utilising our core structures as an income to compensate along with several types of bearish flies. Along with that, a responsive IVTS (VIX/VIX3m) based system for opportunistic black swan hedges. Along with that, moved back on to the LTI research and trying to incorporate that into things as well.

Today, with IV so inflated on TSLA calls, I put on a few call BWBs when TSLA hit 1098 and they’re already at profit target so I am working on removing those. Easy money for a “still laying in bed” trade (I’m on the west coast now so yeah, it was 7:30 am :)). Pays for the upcoming WSOP tournaments, including the main event so that was a positive. I spend Nov 1-Nov 16 or so just smashing out tournaments daily. Been studying like mad to get prepped. Got a 66th out of about 750 in the WSOP 3k about 3 weeks ago and busted the rest with horrific luck (3 4% run outs to bust)

I’ve put up both my houses for sale in Cayman and Canada as we start to integrate our life more in LA. If one sells, I’ll probably remove the other from listing and go from there. Both of the houses are applying for the governor’s general award (one in Cayman and one in Canada). They’re at the Canada house photographing now. It’s so fucking sweet, I really hate that our lives changed so much that we’re not able to properly use it. But at least I spent a ton of time there this year.

The Cayman house had a ton of renovations put into it recently and it’s the one I hope sells first. It’s sweet as well but we’d just not be able to get down there often enough. Maybe when I get a plane upgrade but meh, market is hot in both places, need to take advantage of that. Nice architecture.

We’re going to gut the place we’re in now in hidden hills (it’s the most uncapped neighbourhood in CA so the potential for return is insane). We’ll redesign it in the same type of smart architecture but integrated with the neighbourhood increase it to about 8,300 square feet which should command the best return. We have plans for our final swan song house but we need to find the right tear down within the hood. We’re in love with Hidden Hills so we aren’t going to leave this neighbourhood…but finding a good place to build it will be a real challenge. There’s just not much left, and the prices have increased so much that I have fixation issues on what they were in 2020. At least while we are looking and even while it’s being constructed, we can stay in the current place. That’s the idea.

We’re not used to the sense of community that we find here, it’s like we finally found where we want to be. Awesome events consistently and a great sense of belonging. We had just attended the fair and the halloween party. My wife has made tons of new friends so all in all a great start. A few pics from that:

The rest of my year is basically WSOP, finalising my check-ride and starting IFR training. We just got back from Necker Island (got to spend a lot time with Richard Branson which was super cool). That will be the next post!

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Been racking up the hours in the plane. Mostly for utility but also for training. I am 7-9 days away from the check ride and from that point I’ll insta do my IFR. I’ve already got 230 hours with 9 hrs solo. Yesterday I flew CNC3 to CYKF and back solo which was cool but also not that complicated or hard especially compared to a busy uncontrolled circuit at a training heavy airport like CNC3 (Brampton).

I found KVNY (Van Nuys) the busiest general aviation airport in the world to be easier because it’s controlled. The ATC spaces you and tells you what to do. AT CNC3, which is busy and uncontrolled (there’s no tower), there’s like 7 students training in the circuit at any given time. On my second day of solo circuits, I had one student line up on the runway as I was like a 1/4 mile final. Literally about to land but he’s there! So I had to full throttle. pitch up and apply right rudder and do a go-around which can be somewhat unsafe (lots of accidents happen from this). I radio’d to the guy, while I am doing this, and told him I was on short final and that I am initiating a go-around and to hold tight (don’t take off). He nervously acknowledged and realised his (big) mistake. He obviously wasn’t paying attention and didn’t check final or hear my radio call. Bad form. Like I said above, it can be a tiny bit dangerous if not done coordinated. You’re full power and pitching up which causes the airplane to yaw left (p-factor and all that). If you don’t put good right rudder and manage the plane, you can have an accident as you’ll flip to the left and dive/stall into the ground. There’s been a few fatalities this year already in the Cirrus. The G6 new generation I have does have envelope protection and loads of great safety features but you still have to be diligent and slowly advance throttle, pitch-up (but not too much, just the typical nose up climb attitude) and right rudder and don’t put up the 50% flaps too quickly (90 knots or above)! That’s a huge mistake people make.. In a plane this powerful, you can just arrest the fall and then coordinated and carefully/diligently do the go around. All in all, I’ve had to do 7 go-arounds @ CNC3 due to improper spacing and the incident noted above.

In other personal aviation news, I demo’d a sweet M600 SLS last week. It’s a jet Turbo prop. I’ll eventually outgrow the Cirrus as the kids get larger. It only fits 5 and with dogs, I can’t take even close to full fuel. The M600 SLS is pressurised, it’s a jet-engine which is 10x more reliable, and you can fit tons of weight into it and get 1400 NM. I’d be lucky to get 700nm fully loaded. But it’s a spicy meatball. The 100 dollar hamburger becomes the 1000 dollar oyster 🙂

I think the demo pilot thought I had a lot more experience than I did because he let me fly the thing from start to finish (an unassisted take off and landing). The thing felt so different from a piston. The controls were super heavy requiring a lot of trim after take-off. But get this, it’s approach speed is the same as the Cirrus. 85 knots. The landing was a tiny bit hard but man for the first time flying a turbine, I was pretty happy with it.

We’re off to LA tomorrow and I’ll drive the family to Chicago where they will board a flight. I’ll then drive the rest of the way for another roadtrip with Chris

(Chicago–>Lincoln–>Denver–>Utah–>Vegas–>LA)

I’ll spend a week or so in LA then fly back to finish up the PPL and then we’re off to Necker for Ash’s 40th. After that, I am back for the WSOP (hopefully it’s going to run) and I’ll finish up IFR and by December hopefully I’ll be flying Ash and I around for mini weekend vacations. I also might go out to Europe to see Heaven Shall Burn (fav band) perform. The idea was that I’d rent an SR22 there and fly to 3-4 of the shows. We’ll see! By the new year, I’ll be flying the family around having hopefully racked up 400+ hours and IFR rating in pocket.

As for the trades this quarter, it’s been a slow period of low vol and I expect it to be pretty lack luster relative to the other quarters. Probably a 5-8% gain but who knows. We’ll see how it all plays out. We’re half way thru the quarter now and it’s been like 1-2% but with decent of theta and opportunity for EOQ.

That’s it for now, gotta go pack and get ready for months of travel and experiences…first thing I am doing when back in LA is a comedy club ! One of my favourite activities. I went like 5x when we were there in May.

For the last several years, I’ve gone deep into the “lab” working on backtests and coming up with portfolio compositions that work. The focus has been on the reduction of variance by diversification which in turn increases geometric return and lowers time spent in draw down. We aren’t perfectly diversified but every little bit helps. We focus on what we can do which is spreading out the time of entries, spreading out the types of income trades (each with their own nuances and own particulars) and we spread out the type of black swan hedge each has. A fully entered campaign takes 11-13 weeks and involves putting 1/13th the portfolio in action per week across 3-4 different types of income trades. Each week is a different spot in the market and represents different strikes. This gives us skew diversification and naturally allows for older trades to hedge/protect newer trades. Not only that, but the entries of the black swan hedges (inherent and built into each income trade) are also spread across different strikes naturally through time.

Are each of the income trades perfectly diversified? No, but they are a bit and that’s the best we can do. They each have their own quirks and weaknesses and any bit of help we can get in diversity helps with the reduction in variance especially by having their entries spread over time. As well, each income trade has it’s own brand of BSH which is quite different from each other. All of that helps.

The tests we’ve done (we can only really do from 2014) suggest an annualised return of 43% or so without the black swan factory (which is a separate portfolio of trades). We’re on target for 25% this year so far and we’re at 41.11% since April 1st, 2020. If you go 1yr, it’s better, at 50% for the last 12 calendar months. Pretty closely matching. We’ve had no Black swans since April 2020 so the results match. Now, If you couple in the BSH factory the returns go drastically up (due to the events of Aug 2015, Feb 2018 and March 2020) to an average of 70% a year backtested.

Of course, now that everything is compiled and running, I am just following the system and doing the trades as they were tested. It’s got to be the most boring year of trading I’ve ever experienced and that’s by design. It’s systematic and there’s little draw down or stress. I am fully aware that during an event or crisis, it’ll be a fun few days but there shouldn’t be any draw down to deal with, just a maniac removal of risk and locking in BS profits. It won’t be boring and that’ll come sometime but during the normal days, it’s about as benign as you can get. Systematic, emotionless, and predictable.

The active research is naturally to find a 4th or 5th strategy that we can combine into the already existing infrastructure to further reduce variance. Eyes are open but nothing makes the cut just yet. It’ll take a lot to make it into the mix. The focus now is on opportunistic addition of BSH during IVTS spikes and black swan factory composition research. My life job is to eye up new strategies (that are in my realm of skill) and to see if they’d work and fit well, to focus on convexity and composition of trades that provide convexity (positive exposure to black swan)