Samwise Quick Reference Handbook
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Sam, sorry in advance I know this was recently asked and answered, but are you planning to launch a new portfolio for the eventual correction?
Yes. Well, maybe. Suppose we decide to go to cash for some reason or decide to put on a short trade because the markets at extreme.
In that case, we might not launch a portfolio because then whatever portfolio has gone to cash will be the same as watching a new portfolio
So for example, we toyed with the idea of putting on a hedged short trade by purchasing the 600 June 2027 puts hedged by August 550-580 call spread to capitalize on the next correction.
We’ve decided not to do that, but might reconsider if the market goes too extremes.
If we do make a trade like that, it would be the same as starting off with a new portfolio at the Lowe’s
Because we would be closing out short positions and then going along at the lows of the correction
There would be no point in adding a new portfolio into the mix
Realistically, it’s gonna start to get really complicated
So we might start doing things in a way that will allow us to limit the number of portfolios we launch
I mean, in theory one could just make all the long trades in an existing portfolio during the next correction right?
That’s a totally valid way to do approach it. One thing we could do is outline a model that mimics exactly what arryn holds but starting from scratch. We’d then close out the portfolio once fully it’s hedged. That’s one way to do this.
Whatever we do, the reality is that we cannot keep this going. We’d end up with too many portoflios. We might even decide to consolidate the portfolio so that there’s just one of each type.
Instead of Lannister, Stark and Arryn, we’d just have Arryn. We just need a very clear-cut way to do this logically and in a straight forward way.
I think derivative model portoflios is the way to do it.
Correction happens, we launch Arryn Derivative 1. Rebound happens, we buy hedges, we close out the portfolio as it is now aligned with Arryn.
The only problem is tracking performance. That’s the single biggest problem with going down that route.
I’ll have to think about it very carefully.
Adding to my comment below. Here’s how performance can be tracked effetely. So instead of having several different portfolios, what we do is track performance from dates.
So we stake a snapshot of Arryn on a very specific date. Lock in the new purchase prices, then put on the new hedges. Now we’re all locked in.
Then when we close positions, we show performance of Arryn based on various launch dates based on corrections.
Arryn 1: August 2024 Correction
Arryn 2: September 2024 Correction
Arryn 3: January 2025 Correction
Arryn 4: March 2025 Correction
We show performance from original launch, assuming entries in September, January and March all separately.
We’re always only doing 1 set of trades with different levels of performance. That’s probably the way to go.
Thanks for your thoughts. It gives me something to think about.
Thanks and the trades are the same. Even if you allocate $$$ to a trade they can just allocate pro rata whatever they want to do $50K, $100K, $250K etc.
@Sam, I know there are a lot of portfolio models you have right now. But if we had 20% of a portfolio sitting in cash, where would you recommend putting it right now? Or would you say wait for a correction, and then buy into some stock thats oversold? I haven’t dived into options yet. Thank you 🙂
This is one of those questions that Sam cannot answer as it crosses into financial advice. I recommend reading the investing basics, but long story short, we’re super late into a rally, and the risk of blowing up your account goes up from buying this late.
When we arrive at a correction, Sam himself will update or add a new portfolio when the time is right, and you can follow the models that suit your risk levels the best.
That makes a lot of sense. Thank you for your answer 🙂
So we do have portfolio holding pretty substantial amount of cash.
Not quite sure we’re about 20% but we do have portfolios that are holding around 10% in cash
As our portfolios are concerned, we are waiting for a correction to deploy that on the long side
We may use that cash across portfolios to purchase hedges for the positions we own right now.
But hedges are nearly tailored to whatever it is, that’s in the portfolio
There isn’t a catch all hedge that works for all portfolios