Q2 Update

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.

Some relaxation before the big flight the next day

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

Bad weather brewing

Some Chip Porn from the $800 Deep Stack

Updates for the Quarter

Finished the quarter at 8.5% which was a good look given the S&P was down about 5% but I felt like things could have been managed better especially the initial response and the adjustment to the huge bearish rallies we had. I have two accounts (EDF w/ a seat in Chicago to trade futures) and IB. The EDF account I purposely left on as totally systematic and had traded the IB account more discretionary. The systematic account did beat the discretionary account. Now some caveats there, when we have a large market event like this quarter, we often pause new entries of OTM trades, allow convexity to play out in our tail structures and move to more defined risk structures like ATM trades but only until we get an all clear, this is usually days to weeks max. 99% of the time we’re in our systems. Some learning nuggets in there but mostly nothing we didn’t already know. Interestingly, the account would have published >20% result if the market closed anywhere near 4350 or below but alas, we had a bullish run into EOQ. A little lotto almost. The good news is that this quarter (Q2) is almost up the same as Q1 and it’s only 18 days in. The expectation based on models is that Peak will end up around 25% for H1 2022.

We officially Just finished the first two years for the fund which did awesome. An average of 40% a year which matches the arithmetic backtests we’ve done. I had about 2 years before that with personal trading, so I now have 4 years out of sample matching the available back-testing. All in all, couldn’t ask for anything more. What a successful start. The fund setup was as legit as you could setup and was pretty interesting, it requires 2 independent directors as oversight, a 3rd party fund administration company, that has access to the platform back-end and reviews all trade logs daily, an auditor (Grant Thornton) and loads of administrative tasks by the government. Literally have 10+ people reviewing our trade logs for accounting/oversight. I don’t even have access to the bank account. How neat. Who would have thought. At first, I thought it was a lot of pressure especially given short term swings/dynamics, but I am quite used to it now. As it grows, so does the need for very robust systems, checklists and daily verifications of models/trades. It’s been an interesting experience and I’m loving that our results are published and audited. It’s opening up a lot of pathways and keeping me to task. I am not living my semi-retired life I was on the path to living a few years back but I love what I do so it’s not work.

As I always harp on about my focus being on risk reduction as a way to increase geometric returns, it’s really taking in the point of ergodicity vs non-ergodicity and an example I really liked that Spitznagel used in his book (safe haven) was that of a merchant company who had ships going back and forth in Europe which were prone to pirate attacks. They determined that 1/20 ships would sink and they’d lose 10k (just an example) but had been offered insurance at the price of $600 per ship. Seems like a bad bet right? $12k is more than the 10k they’d lose every 20x on average. But it isn’t when looked at geometrically. The stable cost of $600 per sailing and not having that 10k draw down actually generates more $ over time. It’s a win win for both the merchant and the insurance company. A paradox! But it has one assumption, that the merchant is actioning his money to increase business. If so, then having less cash draw down allows for better compounding in the number of ships he can send. Having that 10k drawdown and having to recover from that drawdown is more of a cost than paying 12k to insure the 20 ships. Go figure. On paper, it’s -2k worse but geometrically it’s better. Here’s another example, if you flip a coin and heads you gain 50% of your worth and tails you lose 40% of your worth, most professional gamblers would all agree that you’ve got POSEV of 5% and it’s a great bet. But geometrically it is a terrible bet. Given enough trials, all participants will go bust. Having been a professional gambler in my university days (only with edges!) I’ve witnessed people through out the years, taking insane $ bets for small edges, I guess if their bankroll is enough, it’s fine but else, it’s eventually a bust. It’s not just about POSEV situations but also bankroll management and risk mitigation via volatility reduction. Most bets aren’t an ergodic process. There’s mathematical equations you can use to figure out how to size bets like these, but rarely do professionals or gamblers alike do that. It’s like Russian roulette (where the 1/6 will end the game forever). Sure, if you had 1000 of you spinning that revolver (picture a multi-verse), you’ll obtain the arithmetic average, but as an independent single trial, it’s an assured total loss. We don’t care that we on average beat the game but what happens if we KEEP playing the game! It’s the life pathway in investing/trading that we care about most not the EV of a specific trade. Large draw-downs along the way are inhibitive to growth more so than the EV itself (for the most part and being reasonable). Everyone says (I stole this) that “Man I wish I invested in Amazon in 1999, I’d be Rich” But that’s pretty stupid, because during that time amazon had 90% draw downs. Imagine following the trajectory of that persons investments.

Volatility tax is such an important concept in finance and one that many ignore. It’s my focus and it’s why I have such positive exposure to tail events and work to have mid-way hedges to reduce drawdown in a campaign setting. I went from being a professional risk taker (I’d define myself this before up until a few years ago) to becoming a professional risk reducer. The entire premise of my trading style is risk reduction (volatility reduction) by way of diversification (as best as I can within the framework I work in) to provide better geometric returns. Just having a risk focused mindset is a win. I don’t focus on returns so much anymore, but rather, smart defined ways to reduce risk via diversification so that my edges are better compounded.

Long Overdue Update

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 🙂

Been a while! Recent Life and Recent Trades

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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Cross Country Solo and heading back to LA

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.

Trades: The Year so Far

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)

Planes, Gains, and Automobiles – Part 3

We departed Santa Fe, NM for Lake Powell, Grand Staircase in Utah. It was a longer drive but a much much more fun drive compared to the previous legs. We had long stretches of road, I mean, I bought this car so I could “gooo faassster” which is the point of the car, no? Probably my favourite purchase ever. Or maybe it’s a mid-life and I crave too much attention, either or.

Nearly every gas fill-up or stop, people come up and chat about the car, which is cool. Most didn’t know they made an SUV. So it’s mostly about that. One guy had an extra tire back in Albuquerque and wanted to send it to us for free in LA. We exchanged info and he’s seriously going to send it for free when we were back. What a nice guy.

We got to our stop in Lake Powell (Under Canvass) which is a glamping type setup. It’s a series of tents (most have hot running water, fire places etc) with a common area, restaurant, fire pits. Very cool. Comfortable camping. Always sleep pretty well when I stay in Under Canvas. Wish I could have stayed an extra day here, well, actually in each location just to see the sights, but we were on the road each day for about 6-8 hours.

Grabbing some good solid video and shots

At night time, with the ridiculous camera in the iPhone, we got some pretty cool night shots. Went exploring a bit while slamming some Truly’s and Scotch which was probably a bit irresponsible. You can see the stars in the shots. Yeah, we were climbing some small cliffs….bad idea with Davis (the dude below).

Actually, a night shot. It was pretty black out but this is what the iPhone Captured

We woke up pretty early the next day, got ready for the shortest leg which was to Vegas. We had plans to hit up Monzu Pizzeria (best pizza ever), meet up with my poker coach (didn’t happen as we got tied up) and to basically just muck about showing Davis the city (he hadn’t been there). I’ve spent a lot of time in Vegas during the WSOP (a month at a time) and it’s been a while since Covid, man, the emotions of competing flood back in. Though my family does come visit, it’s often just for a week or so and I’m there alone playing tournaments each day which is an interesting mental state deviation from normal life both negative and positive. Hard to explain but I can’t wait for the next WSOP in October so that says something! I’ll be licensed PPL and can fly myself to and from LA (1 hour flight) without disrupting the family too much re having to stay over. I can fly back when I bust a tourney.

We got in, expecting to ball it up and get valet at the Wynn but it was closed so we just parked in the normal structure, got our bags and got to the rooms. We ended up opting for two suites as we were sleeping in the same accommodations the whole way down and they were super cheap being during the middle of the week and Vegas was fuckn’ empty! The most eerie thing ever. Check out the pics here. Not a single person at the pool etc. Was so weird to see. No europeans, No Canadians just Americans …it was like the whole rest of world was removed from the mix.

We ended up having Monzu, going to Venetian, touring the strip and then having some sushi at Sushi Mamba. After that, we got free drinks at the Wynn and played some BJ for fun. We lost. But it sparked me wanting to get back into Card Counting and bringing the team back (Ash and I did on our road trip back to Canada in about 2 weeks from this trip and it was awesome…)

The next morning, we had breakfast and started our final leg into LA. Fresh as daisies, thanks to (I seriously think it’s a life hack) Drip Drop. I take these electrolytes that I found out about in Necker. They’re a powder thing you put into water …I’d do like 1-2 during the night when I am drinking and 1-2 in the AM and I seriously have zero hang-overs and negative effects. Highly recommend. We used every single day this trip and we had some messy nights with zero issues next day.

Next up, LA, which was arguably more messy and eventful than the whole trip!

As for trading, the entire trip, the trades just increased in value but we did hit stagnancy in P/L from about Jun 4 to present as the market vol increases. All in all, good results, I think it’ll end up at 25% for the first half of 2021 which is exactly as modelled. It’s been steady since 2018 H2 and quite boring which is what we’re after. Boring trading is good trading. The whole setup is a play on diversification. It’s diversified in time, entries, types of trades, types of black swan hedge and this creates a smoothing of volatility which allows for better compounding. Older trades hedge off newer trades, this most recent down move and vol, is actually preferred by the entire portfolio as we’ve had older trades like Aug, Sep entries that have a hump built up. All of this together, creates a system of trades that don’t care about any market move. That’s the point. It can feel slower, boring and unexciting but it’s steady and it’s $

Planes, Gains, and Automobiles – Part 2

We made it to Austin sometime around 8pm and as we entered the city, three homeless guys came over with metal buckets and shit in their hands dancing around the car, I hadn’t been so nervous in a long time. They just danced and said some stuff and left, thankfully. The nightlife was insane, definitely pre-covid levels. We bar-hopped and had some Indian food and called it a night. We ended up waking up at like 11am which was nuts. We obviously needed the sleep from the flying and driving up to that point I guess. Flying 9 hrs in a prop makes you really tired because of the vibrations and lack of pressurisation. Speaking of which, Chris had got his second vaccine the day before the flight and was reading 76% O2 levels…he wasn’t feeling to good so we reduced altitude. There’s not much you can really do when flying from California towards Texas, Santa Fe is 7500 feet above sea level. Is what it is.

Anyways, we didn’t take many pictures there and left pretty early in the AM towards Oklahoma City. It was pouring rain most of the way which made for slower driving. When we arrived, the valet met us and was super excited, he hadn’t been in a Lamborghini but had it tattooed on his face! We had to ask him for a picture!

The hotel was actually pretty damn cool, it was an art hotel. We admired the art and then made our way into town. At every bar we were asked if we had guns on us. That’s new for me. Seemed like a clean cool small city. But like most of the stops, we didn’t spend much time exploring, more or less, driving during the day and hitting the night life since it’s been so long since we’ve been able to just go out and have some beers in a bar with-out restrictions. The next stop is Santa Fe, New Mexico at a 5-star resort where we had hoped for a more low-key relaxing night.

Here’s some pics of the art:

During this week, the skew changed and I noticed a lot of profits incoming, might have been the most I’ve seen to date actually in $. I think it was about 7-8% total gain on the week period. So yeah, it was a big week for gains which was strange…usually when I go on a trip, I am dealing with chaos, it’s just how it goes for me usually 🙂 Made the trip all that much better. We had gone through a period of about 1 month where the balance did not move at all. I notice that a lot but the piper has to be paid eventually so I knew it was coming in eventually.

On to Santa Fe, I hadn’t realised it was so high up (7,500 feet) but I noticed similar physiological things as I do when flying up high so googled it. I was right. We were high up. I probably should have known that but it was neat that I could tell something was up (no pun intended).

We got there, had some dinner and walked all around for hours, eventually we ended up at a real, and I mean real, local bar. The patrons were literally a cast from the movie clue. It was ridiculous but super fun. We had a biker gang in there, we had a random dude with a peeked hat acting super sketchy, some random old guy rolling cigarettes and then us in bright designer hoodies…The pours at this place, omg, half glasses of Tequila for $6.

Santa Fe is also an art capital of the US. I almost wanted to buy some but it’s gotta wait.

Next stop Under Canvas Lake Powell….to be continued.

Cross Country – Planes, Gains, and Automobiles. Part 1

Ordered a new car in Houston (got it for a steal) and had an instructor pilot fly with me and a friend to drop us off and take the plane back then made a 2000 mile road trip back with a friend to LA. We went Houston –> Austin –> Oklahoma City –> Santa Fe –> Utah –>Las Vegas –> LA. Wild trip in a wild car. It involved planes, some significant gains and a car.

The trip started with some eventful memories. We had planned the first leg to be KVNY to E98 (Benson Municipal), a small airport with some cheap fuel. We landed and the guy that was supposed to be there to fill the plane up was AWOL. We had did some quick calculations and looked for an alternative airport, luckily there was one just 9 min away (we were in the middle of the desert). So there was a chance we weren’t getting off the ground with the reserves we had available unless there was a close by airport.

Beautiful day but the thermals caused some issues with winds, so the landing was one of the trickier ones that I’ve done. We landed with about 45 min reserve which is the Cirrus specified and suggested minimum. We didn’t have much room to the FAA 30 min reserve (we had like 15 min radius to find another airport). Luckily, there was one just 9 min away and after calling to confirm they’d be there, we took off!

Middle of nowhere (Benson Municipal airport)

No Fuel here……

So after doing the calculations, we took off to the nearby Chochise airport where we had another incident, the lady there wasn’t wearing her hearing aid and we told her fill it to tabs (airport slang for filling it up to a specific marker that allocates 60 gallons of 92 total). We were over weight at full and we couldn’t take off if it was above 60. Well, she filled it to full and we had to milk the plane… There was no way for us to take off. Luckily the instructor knew how to milk the plane. She ended up giving us a refund on the unused fuel and we took off towards Houston shortly after. All told the trip took about 6.5 hours of flying.

Milking 345PK

Was tempted to watch some sweet flicks on the VHS but we had to make up time!

Enroute to Houston..the final leg!

The pick up. Beautiful! Such a ridiculous car, almost embarrassing but whatever, it’s a childhood dream so why the fuck not. We got it for under value due to a guy not being able to close on it and I took that opportunity to acquire the car. I can literally sell it for a profit in a year.

We left Houston for Austin during a literal rainstorm. Along the way, we stopped at a small Texas town and had some Mexican food. I don’t think I fit in there, got stared at hard by five pretty burly guys. After checking the market, it was time to leave…

On our way to Austin…listening to some Heaven Shall Burn for the boys..

Trade Compositions for 2021

So far through 2021,

For the income portion: I’ve been doing equal parts HS3EZ, 488 and 484 along with an ATM campaign leaning bearish. This helps provide a lot of diversification.

For the convexity portion: I’ve been doing BSH factory + opportunistic entries of additional black swan insurance (haven’t had to since Feb).

I’ve just started using a base LTI as well

Pretty boring, pretty simple. I’ve found now that I rarely care or even look at what the market is doing. I just enter and add adjustments when required. The first quarter was great and so far April is pretty stagnant but with a lot of potential and I’ve got a solid formed campaign both for the income and convexity portions as well as live LTI. Looking good into finishing Q2. That 48x theta has to come in sometime.

That’s pretty much the summation of how I’ve been running trades through the year. Very boring weekly entries of 48x and HS3EZ plus the management of the convex black swan portfolio. Systematic with intent and with little regard to timing of markets re entries and adjustments. It works.

The intent is to continue to investigate variants and other trades that provide some diversification to the portfolio but I haven’t had anything really pop out. I’ve got some interest in the 0DTE and looking at it from a professional gambling standpoint re edges and trade sizing but I just haven’t had the ability to jump in yet. Probably a summer thing. I will probably finish up a 486 backtest to add to the research. That’s probably all that’s on my radar.

I can’t go into the individual trade compositions because of community privacy etc but you can get more information at the mastermind group, Ron Bertino runs a few awesome well constructed courses there and the community you can become part of is a private one where we share info and strategies and as such we’re mandated to keep specific details private as it’s not fair to others in the group.