Anecdotally (can't say how I know), many firms did very well in the 2020-2021 Covid crash, also its quite cheap to say buy 50 million in far OTM puts to guard against black swan events. It's far more likely that a slow slide in SPY will show some Beta correlation than anything else.
That's a really bad idea, those rebalance daily, so you are basically betting against short-term volatility (if spy goes down 10% in a day then up 10% the next, you are down 1% on spy, on a 2x levered etf you are down 4% or 4x the loss). Also both fees and slippage are really terrible on all levered ETFs
If you really want to do 2x lever its probably best to just buy 6 month or 1 yr dated ITM calls. They're quite cheap and very liquid on SPY.
And yet UPRO (3X SPY) has significantly outperformed 3X the S&P 500 since inception (since June 2009 UPRO is +8000% vs SPY +700%.
The reason is exactly what you described actually. If the underlying exhibits positive momentum, generally trending up instead of oscillating back and forth, the daily balancing works for you instead of against you and the ETF outperforms the target multiple of the underlying.
Yes, if your S&P returns over 3 days are +10%, -10%, +10% then SPY is up 8.9% while UPRO is up 18% (2X, not 3X).
On the other hand if your S&P returns over 3 days are +10%, +10%, +10% then SPY is up 33% while UPRO is up 120% (4X, not 3X).
The big levered ETFs have reasonable volume and limited slippage for any volume retail investors would be trading. Fees are like 0.9% which all things considered isn't bad - given their vast outperformance.
I'm not saying go all in on these, what I'm saying is that your analysis of the levered funds is missing some important details which show up on a quick backtest. If you understand the products and what bet you're making with them, they can be quite reasonable to hold long term - despite popular misconceptions.
> If you really want to do 2x lever its probably best to just buy 6 month or 1 yr dated ITM calls. They're quite cheap and very liquid on SPY.
Respectfully those are much more expensive and if you're near the money quite non-linear. You're going to have to pony up pretty close to the price of just buying the index again to get 2X exposure if you're deep ITM. Near the money you'll need several options to get 2X - and you'll need to delta rebalance. You'll also get eaten alive by theta decay.
To avoid having to pony up a ton of collateral or get eaten by theta, you may as well just buy more SPY on margin - or save yourself the hassle and get an /ES=F or /MES=F.
If you insist on trying to trade the S&P 500 with options (especially if your expiration is only 6-12m away) use SPX or XSP -- not SPY. They're cash-settled European index options, so no early exercise to worry about, no dividends to worry about and they get 60/40 capital gains treatment no matter how long you hold them for.
+1, the criticism of “if s&p goes up and come back down, leveraged investments lose” is just insufficient as a criticism. It examines only one case. I’m probably 30% in SPUU for years now, and would like to hear real criticisms — do you have any real criticisms to share? I legitimately have found so little competent commentary on it, and I think I understand the risk I’m taking, but don’t want to miss an opportunity to get considered input.
> I’m probably 30% in SPUU for years now, and would like to hear real criticisms — do you have any real criticisms to share?
I'm no expert. But it seems like writing out of the money options: it's "free money" until the market suddenly moves against you, and you get your head chopped off. When that inevitably happens, the loss has a good chance of more than wiping out all your prior gains.
Not to “fight“, but just to add to the conversation:
I agree it is taking on more risk, although potentially less than with out-of-the-money options. To lose 99% of spuu’s value the sp500 would have to drop 50% in one day, or 35% for three days in a row, or 20% for nine days in a row, etc with infinite similar cases. It’s not a rigorous argument, but I think those examples give a feel for how common/rare that occurrence would be — I think these particular cases have never happened since the sp500 started.
But it’s certainly riskier-than-traditional in either case
> To lose 99% of spuu’s value the sp500 would have to drop 50% in one day...
Which is exceedingly unlikely because of the circuit breakers. A level 3 breaker is triggered after a 20% decline and halts trading for the remainder of the day.
Finance SWE here, sorry if what I say is wrong. Please correct me if that's the case.
>And yet UPRO (3X SPY) has significantly outperformed 3X the S&P 500 since inception (since June 2009 UPRO is +8000% vs SPY +700%.
Isn't this just hindsight bias? You market time to right after 2008 crash. Those two dates are probably the best possible because from 2009->2020 we had an 11 year uninterrupted bull run.
If you bought in 2020-2021 you would have been screwed for 3 years at the least. If you bought 10x levered out of the money spy calls every 6 months and roll the winnings since 2009 you probably can get even higher, but probably you don't want to do that.
>Respectfully those are much more expensive and if you're near the money quite non-linear. You're going to have to pony up pretty close to the price of just buying the index again to get 2X exposure if you're deep ITM. Near the money you'll need several options to get 2X - and you'll need to delta rebalance. You'll also get eaten alive by theta decay.
Isn't this for retirement saving? IE where we have big chunks of cash we won't see for 20 years, so you can buy like 2 contracts and its good enough. You'd have to pony up 2x to get the underlying index fund anyways, so you might as well just buy deep ITM calls (which right now are hovering at a premium of 3% for strike of 315$ on spy).
+1 for European options, I forgot you can buy those on index funds, is the liquidity enough on deep OTM calls to be worth it though?
>To avoid having to pony up a ton of collateral or get eaten by theta, you may as well just buy more SPY on margin - or save yourself the hassle and get an /ES=F or /MES=F.
I thought margin / borrowing costs for future etfs is some ridiculous 8-12%. Pretty bad if you have no alpha except beta go up!
> Isn't this just hindsight bias? You market time to right after 2008 crash.
Yes absolutely, I just picked when the product launched.
I wanted to point out to parent that the daily balancing isn't just a bad thing, it can be a good thing - it depends on how the underlying performs. You are right it cuts both ways though and you may have to sit in them for years to break even. Note UPRO actually somehow pays a dividend.
> If you bought 10x levered out of the money spy calls every 6 months and roll the winnings since 2009 you probably can get even higher, but probably you don't want to do that.
What do you mean by 10X leveraged calls? Like 10-delta? What was the spread between implied and realized volatility over that period? Ultimately your options outcomes are really based on realized volatility exceeding implied volatility (otherwise you break even or lose).
> Isn't this for retirement saving? IE where we have big chunks of cash we won't see for 20 years, so you can buy like 2 contracts and its good enough.
Parent said contracts that expire in 6 or 12 months on SPY. That means short term capital gains at expiry, and using SPY instead of SPX means you have to deal with early exercise and dividends.
Since you can't buy contracts too far out in time, so you have to sell, roll or exercise. In a tax advantaged account maybe that matters less. Was your proposed strategy to roll? If so, how far before expiry, and to what level?
> You'd have to pony up 2x to get the underlying index fund anyways, so you might as well just buy deep ITM calls (which right now are hovering at a premium of 3% for strike of 315$ on spy).
Over what duration? We need that to figure out the rough APR of the implied borrowing you're doing.
> +1 for European options, I forgot you can buy those on index funds...
On indexes not index funds! SPX option notional value is literally the S&P 500, in index points, times $100. They're big. XSP option notional value is basically the S&P 500, in index points, times $10.
> I thought margin / borrowing costs for future etfs is some ridiculous 8-12%. Pretty bad if you have no alpha except beta go up!
I was suggesting the underlying futures contract rather than a futures ETF. /ES is big, /MES is much smaller.
You didn't actually argue against the point though. How is it obvious that raising the minimum wage benefits all Americans? The people making wage already don't "have any money" yet the economy is fine anyways since they don't make up the majority of spending. Debt has been high forever.
Marx is right, the only thing that matters is labor + capex to create products / services. If rich people want to move money around buying expensive crap that's marginally better and isn't too much harder to produce, we should encourage that. As of now, most of the S&P 500 focuses on producing products for the common man or other businesses. This is exactly what you'd want to see and I don't see why we should rock the boat and reduce the total labor spent on the needs of the average person (minimum wage labor).
You are bounded by the fact that the statement is provable. Let a statement M be provable with a proof length K. By contradiction, if K is non finite, the statement must not be provable. Thus, there must be some positive integer K s.t. the proof length < K. Thus, it suffices to enumerate all proofs of length < K.
Insofar as we are given provability, we can solve halting.
I was curious as to how it works, so I implemented here:
turingmachine.io/?import-gist=c862f28918f3d889f964797694d28fcc
If you run it for a bit you see what's going on, State B turns 0's into 2's and 1's into 1's transitioning to C and state C turns 3 -> 2's and transitions to A. So you just iteratively lengthen your run of 3's exponentially since it requires a full pass through all the 3's to fix a 2->1.
I mean yeah. Not existing has a utility value of 0. You can make the same argument for people who don't exist yet. Is it infinite utility to go around as a government and force people to pump out 100 babies a year? Since not existing is so bad?
TBH if I never existed by definition I would be fine with it, you know, since I don't exist and was never born. I don't think its coherent to measure things from aggregate utilitarian POV, since the optimal solution seems relentless expansionism like a virus.
> I don't think its coherent to measure things from aggregate utilitarian POV
I do, because second-person collectively-singular Humanity is a living thing all its own, and the more humans there are the more alive We are. Your argument is the anthropological equivalent of “640K ought to be enough for anybody”.
Having more than 640Kb of RAM isn't a good in of itself, it's only good in that applications arose which required more RAM.
Similarly higher population isn't a good in of itself. It seems to me that there's much less evidence that there's something that needs higher population.
I don't see how higher population necessarily makes humanity as a collective organism more human. That seems like saying that an individual human is more human if they weigh more.
So by the tyranny of exponential growth, we should just start building massive breeding factories and forceably enslaving people randomly matching them to have children? Because this could actually be the optimal policy if we take your view of "second persons" to it's optimum.
In your world governments forceably breed humans like chickens in massive factory farms churning out people to the carrying capacity of the planet. I don't want to live there and I sure as hell don't find it moral.
Why not encourage through policy and taxation changes? Invest in culture that promotes. Restructure society to encourage having babies at an earlier age.
Since that's nearly certainly less efficient at population expansion compared to physical violence. Conservatively, modern humans seem to settle at having 2~4 children per woman but historically it was not uncommon to have families of size exceeding 10.
The whole point is that if you accept the fact that expanding population is good a priori, this leads to stupid conclusions by the tyranny of exponential growth. Who cares if the average person is a slave when you have several hundred billion of them. Who cares if mothers die horribly after being forced to carry child after child.
Personally I think the only consistent viewpoint is some form of logarithmic population * average well being metric to measure utility. From that perspective, I have no clue how a policy maker should act today. Hopefully smarter minds than mine figure it out!
> Because this could actually be the optimal policy if we take your view of "second persons" to it's optimum.
Maybe if you're evil enough to not care about any individual human's quality of life. Is there a word for the logical fallacy where you argue against the most absurd possible interpretation of a person's beliefs in order to feel no guilt for disregarding them?
The idea is that due to exponential growth, amortized over long enough times, the utility of a person's happiness right now is 0 compared to the utility of filling the planet with lets say hundreds of billions of people with barely alive standards of living. Even if an individual persons life is 100x worse than present day, it doesn't matter since there are billions more of them.
This is the standard issue with any aggregate utilitarianism theories of morality.
Good, this is exactly what we wanted. Service worker classification is straight up wealth transfer from delivery users to drivers since competition is so tight and everyone ie being squeezed. The needs of the many outweigh the entitlement of the few. It's unfair for delivery app users to have to subsidize employment for drivers when its clear there's many willing to accept the current terms.
Gross take. Entitled, self-centered, and a ham-handed attempt to co-opt the term "wealth transfer". If you really have this little regard for folks who actually work for a living you should get in your car and go get your own shit.
Except everyone else also works for a living? Wealth transfer is a great descriptor of what that type of policy making leads to since it is in fact exactly taking money from delivery app users and giving to delivery app drivers. Do you disagree with this dynamic? If so where do you think the money for paying these drivers extra comes from?
The amount of people using food delivery apps is some 2.31 billion worldwide. Are you suggesting that some 1/3 of the human population who would prefer to pay less for their food delivery all don't work for a living?
Huh? I thought the issue before ringattention is the memory requirement of the softmax layer, since you have to load the whole matrix in at once? It's O(s^2) no?
But no, FlashAttention already solved the memory requirements of attention. RingAttention is primarily useful for parallelizing across the sequence component.
Surely we apply the same level of scrutiny to everyone right? Don't pretend that this is about China being a bad actor in the space. Everyone is a bad actor here, and arguably the NSA is worse.
I'm not trying to say DJI shouldn't be banned for government applications. It definitely has a hardware kill switch back home. But let's not pretend that facebook et al + Google + Apple are any different.
> But let's not pretend that facebook et al + Google + Apple are any different.
Were we pretending this? Was anyone pretending this? It would likewise be quite wise for China to ban the use of products made by these companies in their own sensitive federal applications, and my understanding is that broadly, they have.
