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This is why people don't understand hedging. Some people will get it but for the majority it will never, ever compute.

• deleted 6y ago
  [deleted]
• anonu 6y ago
  Not sure what you're referring to. I'm saying a large percentage number in the headline is misleading. It looks cool but the reality of tail hedging is your paying up for insurance premiums. So this 3600 percent return is based on the premium you paid? The denominator is probably small... On the order of a few million is my guess..
  • hogFeast 6y ago
    Yes. You have to pay for insurance. And in terms of performance, you could have totally hedged out a portfolio for under 50bps (often well under) pretty much all the way through this market. Universa did this but in a more sophisticated way...afaik, they created a portfolio where you got paid to hedge. If this isn't clear: this is the kind of thing that people look back on and can't believe that it occurred. This is CLO manager in 2005 stuff. Literally incomprehensible. All because people cannot resist strategies that show small gains consistently. Retail investors cannot and won't ever understand that you will underperform, that is what a hedge is for, and that is how you reduce risk and end up with returns that crush the market. If you try to chase returns, you will get owned.
    • pnako 6y ago
      The idea that you can insure a stock portfolio against market events is bogus on its face, without any fancy math or logical argument. Do I need to even discuss it?