Schwab ETFs do not have much option liquidity. For such cases, I might use different ETFs or futures to represent the same category. Sometimes it is also cheaper to purchase ETFs with a higher price due to trading fees being based on number of shares. I also may use mutual funds if I don't plan to do much active trading. Index options are also sometimes preferable due to European settlement (i.e. cannot be exercised early). Some equivalents:
* [Was 60/40 a Big Head Fake? Some charts from DBi](https://dbi.co/was-60-40-a-big-head-fake-some-charts-from-dbi/)
+
- [Was 60/40 a Big Head Fake? Some charts from DBi](https://dbi.co/was-60-40-a-big-head-fake-some-charts-from-dbi/)
Videos:
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* [ETF Edge on the mechanics of managed futures](https://youtu.be/Uyxk3leyw5M?si=WOaadUAqB28gs6Fv)
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* [How DBMF Replicates Top Hedge Fund Managers | Andrew Beer, iMGP](https://youtu.be/1e42uZpnq4k?si=SpwXi1ELlvMCLbP5)
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* [Protect Your Portfolio: How Managed Futures (CTA) Thrive When Stocks Crash](https://youtu.be/RtWw1blXjow?si=OGKEYN6_mpt_VXtQ)
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* [Tap Into The Same Advantage That Hedge Funds Do | Andrew Beer](https://youtu.be/7coRSk2NwUU?si=0FRTFCNqCHUKl0Xr)
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* [KMLM ETF Review. A true diversifier. Who should buy it and how it fits in a portfolio](https://youtu.be/ukT_l0PVQ4A?si=5EQhlwDzoB06zfFH)
+
- [ETF Edge on the mechanics of managed futures](https://youtu.be/Uyxk3leyw5M?si=WOaadUAqB28gs6Fv)
+
- [How DBMF Replicates Top Hedge Fund Managers | Andrew Beer, iMGP](https://youtu.be/1e42uZpnq4k?si=SpwXi1ELlvMCLbP5)
+
- [Protect Your Portfolio: How Managed Futures (CTA) Thrive When Stocks Crash](https://youtu.be/RtWw1blXjow?si=OGKEYN6_mpt_VXtQ)
+
- [Tap Into The Same Advantage That Hedge Funds Do | Andrew Beer](https://youtu.be/7coRSk2NwUU?si=0FRTFCNqCHUKl0Xr)
+
- [KMLM ETF Review. A true diversifier. Who should buy it and how it fits in a portfolio](https://youtu.be/ukT_l0PVQ4A?si=5EQhlwDzoB06zfFH)
### Typical allocation
@@ 129,7 128,7 @@
| 1 ZEBRA LEAPS in SPY (2 long calls, 1 short call) | $14k | $50k | 3.5x |
| 1 /MES future | $2k | $30k | 15x |
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In all cases but the first, you are paying less to have a higher exposure in the same market. Each has a different risk profile, generally increasing with leverage. In all cases you can lose money.
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In all cases but the first, you are paying less to have a higher exposure in the same market. Each has a different risk profile, generally increasing with leverage. In all cases you can lose money.
Not all cases involve actually owning shares. For derivatives, it is not too important whether you end up with shares or not, as the P/L will be similar to owning the exposed amount. They also have expirations, but you can continually roll them to future dates to simulate a buy and hold.
@@ 173,12 172,14 @@
```
Notional Exposure includes:
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- Total value of all equities
- Options notional exposure
- Exclude box spread loans as these should be treated like a margin loan and part of negative option value below
The denominator should include only the market value of the option contract itself.
##### Futures
@@ 385,6 385,10 @@
There are some arguments to treat social security as part of your bonds allocation. It is more just an income source during retirement, and a bit difficult to calculate as a bonds value. I just don't consider social security at all in my investments or net worth.
+
#### Bond ETFs
+
+
- [AGGH vs SCHZ](https://testfol.io/?s=bDKszgONcQE)
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### Options
#### Videos
@@ 413,9 417,9 @@
Explanation from a Schwab rep:
> I see you have been trading /MES so let's say you buy 1 /MES. First you will need to put up the house requirement needed to enter into the trade which will come out of your option BP (buying power), for /MES this is currently 2,550 per contract.
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>
+
>
> If you hold onto the /MES position through the futures market close, then there will be two different sweeps. The first is M2M (mark to market). M2M accounts for profits and losses during that day using the futures settlement price. Initially M2M will compare your trade price to the futures settlement price. If a profit is made, then we will move the excess profit from the futures cash balance to your cash & sweep vehicle. If it's a loss, then we will take cash from your cash & sweep vehicle and sweep it to the futures cash. If you were to hold /MES through more than one day, then it will compare today's settlement vs yesterday's settlement price.
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>
+
>
> The second cash sweep that will happen actually happens overnight. You will see this listed as "Cash Sweep" in ThinkorSwim. This overnight sweep is used to get the futures cash balance high enough to cover the exchange's initial requirement which is posted by the CME. As of today, for /MES the exchange initial requirement is 2,412.3 per contract for longs, however this does change every day. The overnight sweep moves the cash, so the futures cash balance equals the exchange initial requirement.
Explanation from Interactive Brokers:
@@ 448,7 452,7 @@
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Buying BND *might* be equivalent to shorting (selling) /10Y futures. Shorting /10Y means betting that current rates come down, which means bonds at older rates will go up in value. From a portfolio standpoint, bonds are usually included to reduce volatility. They also give some income, so I'm not yet sure if the short futures position can be considered equivalent. It is something to test long term.
+
Buying BND _might_ be equivalent to shorting (selling) /10Y futures. Shorting /10Y means betting that current rates come down, which means bonds at older rates will go up in value. From a portfolio standpoint, bonds are usually included to reduce volatility. They also give some income, so I'm not yet sure if the short futures position can be considered equivalent. It is something to test long term.
See [Understanding Treasury Futures](https://www.cmegroup.com/education/files/understanding-treasury-futures.pdf) from the CME.