If I understand correctly, you are advocating for using a call only strategy (as opposed to a (synthetic) long strategy) to achieve higher leverage than would otherwise be possible?
> This is partly for speculation, but it seems reasonable for most people with 2 years of savings to have 10% of their net worth in SPY options or 20% in SPX options [4] for hedging purposes alone.
To clarify, you mean 10% of net worth being in this specific contract (SPY280616C01000000)? So roughly 15:1 leverage using options?
Readers should note this has very strong returns if you get that 50%+ return, but isn’t straight leverage—the median outcome here is about a 12.7% reduction in portfolio value in next 2.5 years relative to pure SPY.
Yes buying volatility is intentional. If I thought more I would fine tune things, but it’s not so important to gain 20% when spy goes up 10% because that probably doesn’t mean loss of your future salary.
I should clarify that I mean closer to 0.2 years of salary than 10% of whatever your net worth is, if you just want to hedge your automation risk, given the potential loss is a fixed ~10 years of salary. On second thought it should maybe be less than this due to various factors. To give a proper recommendation I would have to do some math, which I might do if this becomes a longform.
If I understand correctly, you are advocating for using a call only strategy (as opposed to a (synthetic) long strategy) to achieve higher leverage than would otherwise be possible?
> This is partly for speculation, but it seems reasonable for most people with 2 years of savings to have 10% of their net worth in SPY options or 20% in SPX options [4] for hedging purposes alone.
To clarify, you mean 10% of net worth being in this specific contract (SPY280616C01000000)? So roughly 15:1 leverage using options?
Readers should note this has very strong returns if you get that 50%+ return, but isn’t straight leverage—the median outcome here is about a 12.7% reduction in portfolio value in next 2.5 years relative to pure SPY.
Yes buying volatility is intentional. If I thought more I would fine tune things, but it’s not so important to gain 20% when spy goes up 10% because that probably doesn’t mean loss of your future salary.
I should clarify that I mean closer to 0.2 years of salary than 10% of whatever your net worth is, if you just want to hedge your automation risk, given the potential loss is a fixed ~10 years of salary. On second thought it should maybe be less than this due to various factors. To give a proper recommendation I would have to do some math, which I might do if this becomes a longform.