Logical Invest team’s own personal allocations?

Home Forums Logical Invest Forum Logical Invest team’s own personal allocations?

Viewing 44 posts - 1 through 44 (of 44 total)
  • Author
  • #78759

    I read in some recent threads that the Logical Invest team invests its own money using the Logical Invest platform. I’m curious, would you be willing to disclose your personal allocations to the strategies and why you’ve chosen them? percentages would be fine. we don’t need to know absolute numbers.



    My strategy of choice is the Top3 strategy. As I am a bit conservative I often tend to err on the side of cash. On my more active account I use variations of the permanent portfolio, MYRS (using futures) and some non-LI shorter term strategies. I also trade crypto.


    I am doing the “Enhanced Permanent Portfolio Strategy” however instead of buying GLD, TLT or SPY I write LEAP options on these ETFs. GLD and TLT about delta 25 put options and SPY d75 put options. Instead of GLD and SPY I use Future options on GC and ES. This generates constant income from premium decay but it needs also more frequent small allocation changes as these positions change delta on bigger moves of the underlying.


    I am primarily invested in the Aggressive Portfolio.


    I’m in the Volatility below 15% portfolio, but with some cash on top (scaredy-cat of the team, and proud of it!)


    Hi. Vangelis, what is MYRS?


    Gentlemen, thanks for sharing your allocations. I feel more confident know you have skin in the game and like that you each have different styles/objectives.


    When you sell the options, how many days out will the contract be?



    I am basically doing the permanent portfolio strategy using options instead of ETFs.
    For SPY I sell delta 0.7 put options 30, 60 and 90 days out. When the first is about to expire, then I roll back. Delta 0.7 is very similar to a long position. I use d0.7 to minimize risk in case of a sudden crash. In such case my delta can increase only 30%. I use ES Future options instead of SPY. If SPY goes down, then I roll far out with the goal to build up a vega position which captures as much volatility premium as possible.
    For TLT I sell delta 0.3-0.5 put options with a very long expiry. At the moment I have sold the Jan 15, 2021 put options.
    For Gold I do the same as for TLT. It is important to go far out with the expiry, so that you do not have to adjust your delta $ position every day if the underlying does big moves.
    If delta increases to much, then I buy back a put and sell a call with the same time value. The goal is to only do trades with a negative price (profit).
    If the underlying goes up again, then I would open new position in march 21 or even Jan 22.
    This way you can make an additional 10% per year without increasing your risk.
    The whole thing is not so easy to execute and I needed several years to manage successfully bigger price moves. The most important rule is to only use options with an expiry of at least 200 days. Second rule is not to sell low delta SPY or ES puts as they will increase delta very fast in a crash.


    Dear Frank,

    Thanks for your clear explanation.

    I asume that the sentence “The most important rule is to only use options with an expiry of at least 200 days” is for TLT and GLD. Why are you selecting this duration for GLD and TLT, because for the SPY its 30,60,90?



    You don’t have really a downside crash risk for GLD and TLT. The delta 0.7 for SPY options limits your downside delta increase and risk. You can also sell such put options with 200 and more days of expiry but this will reduce a lot your premium income. In a real crash the risk is about the same as both options will go to delta 1.


    @Vangelis: With regards to MYRS using futures, do you adjust the rebalance date to when you roll over the futures contracts or to you rebalance on the last day/first day of month and roll over the contracts independent of the rebalance date?


    I adjust the re-balance date. Much like MYRS, the strategy takes advantage of contango but it has its’ own sets of rules, some being discretionary. This may not be the best time for such a strategy without using some extra type of protection. There are also variations that can be traded like selling a spread that can reduce risk.


    Got it, thanks a lot for sharing!


    Nice guys, thanks for sharing.


    @Frank, when selling the puts, how do you determine the sizing of the position? For instance, if the current strategy allocation says you need to have $30K in SPY, how many of which puts would you sell? Do you go by price or by buying power reduction or some other metric?

    Current 70 delta puts for aug, sep and oct go for $17, $25 and $29, respectively…

    I’m really asking to implement the replacement for the lost 3x ETFs with options. As a quick fix for this month I am doing it with long ATM calls in GLD, but obviously I don’t want to be buying premium and want to be selling it… Just not 100% sure how to calculate the sizes right on the put side.

    Thank you.


    You divide 30k$ by the SPY price and by 100: 30’000$/319$/100=0.94
    So, this means that at delta 1 you would have to sell 1 put option. If you sell a delta 0.7 put option you are slightly underinvested but you get the time value of the option so that’s ok as you need to be aware that if SPY goes down you end up quite quickly at delta 1.
    I would sell put options about 60-90 days out

    Raj N.

    @Frank1 Grossman, I need some further clarity on your sentence “If delta increases to much, then I buy back a put and sell a call with the same time value. The goal is to only do trades with a negative price (profit).
    If the underlying goes up again, then I would open new position in march 21 or even Jan 22.”. Can you please explain with a short example? Also, you use options on /ES and /GC. Is it because of sizing resulting in lower commissions or are the premiums better? Since /ES and /GC are futures, I assume the options expiry coincide with the future roll dates? Thanks so much for a very interesting implementation.

    Mark Vincent

    Frank thank you for sharing the details of how to turn a stock trading system into an options trading system. You are the only one I have found who has described this. I cannot find it anywhere on the internet. You might want to publish this on seeking alpha I’m sure there would be a lot of interest and it would be good advertising for LI. I am trying to turn some of the other systems into options trading systems. For example would the same criteria apply to the NASDAQ 100 leaders? I know it would be a lot of work but I’m sure there would be interest in following your trades and the reason why you placed each one. The greeks seem to be as important as a winning system itself and that is the part that I think people get confused about.

    Thanks Again for sharing,
    Mark V.


    Frank, Can you setup a zoom meeting, to explain how you utilizing options to enhance the performance? I actually didn’t like the CAGR of the Enhanced Permanent Portfolio Strategy. But via option, the CAGR shall be on top of the list, while the drawdown, as the overall risk is not increased, is quite acceptable. thank you.


    I am just finishing a Document about the strategy. I will post it in a few days.


    Here is a link to a document explaining the option based Permanent Portfolio Strategy


    Many thanks for sharing this!

    Mark Vincent

    Thank you Frank,

    How are you able to backtest on Optionnet?

    – Are you able to simulate the 20 year history of the LI permanent portfolio?
    – Do you simulate certain time periods as you roll the options and then manually calculate your returns?
    – Do you manually enter each months allocations?

    Any Help would be appreciated.



    Thanks Frank so the details are more clear now, I personally don’t traded Options a lot in the past years but I think I will use more in the future.Using Options for this strategy is an interesting approach.


    I do not have to simulate long periods because the strategy itself is backtested in QuantTrader. I only need to simulate difficult market situations and make sure that I get at least a similar result with options as with ETFs.
    During normal market periods options always provide better returns but nearly all option investors underestimate the risk of some of the most popular option strategies during difficult market periods. The result is that most lose money and have to learn this the hard way. With OptionNet you can manually place trades and test what would have happened during such difficult market periods.


    Frank, thanks. This is a very good paper. I still not certain of the option portion of TLT and GLD. I think these two assets are for hedge purpose. So when the market tanks, we wish treasury and gold price will pop, to offset the loss. If we sell 0.3delta put as a replacement, then we wont see a pop, when market tanks. Can you explain your allocation between normal assets and the option for treasury and gold?
    Also in your previous post, you mentioned to sell 0.7 delta put for SPY, while in the paper, you described half long spy half sell at the money put. I guess to sell 0.7 delta put is less risky. Can you help to clarify?

    Raj N.

    Thanks so much Frank for a very detailed description of your strategy. Do have any rough estimate as to how much CAGR is added to the enhance permanent portfolio strategy by using the options technique that you described?


    I sell delta 0.3 put options but about 3x the quantity so that this option position has the same effect as a ETF position. In IB you can display the “portfolio delta $” value of such a position and this must be the same as you would have for an ETF position. The only way such an option position has perhapy a slightly lower immediate hedging effect is if volatility spikes. This however is not really an issue as you know that you will get this back rather quickly if volatility drops again.
    Concerning the ES options I first sold delta 0.7 put options but later switched to the combination of a Future and a 0.5 option as it is simpler to control your total portfolio delta by selling Futures in a crash as by selling the options as Futures have a very small spread and low commissions.
    Practically -2x delta0.75 put options are more or less the same as 1x ES Future and -1x delta0.5 put


    At the moment using options adds nearly 1% per month to the CAGR of the underlying ETF strategy. If volatility goes down to the previous low levels then we will probably get at least 0.5%

    Raj N.

    Thanks so much Frank. Sorry about my question earlier, you had already addressed it in your paper (how much CAGR is added via options). I am still a bit confused regarding GLD and TLT. For both of these, you just sell put options and don’t own any ETF/Futures long position? How do you size the position?

    For example, currently on Logical Invest, the allocations for Enhanced Permanent Portfolio are SPY 40%, GLD 10% and TLT 50%. Given that you recommend 60% allocation towards this strategy, for a 1Million portfolio, $600K will be allocated to this strategy, resulting in $60000 GLD, $240,000 SPY and $300,000 TLT allocations. Let’s assume that I am implementing this with SPY/GLD/TLT ETFs and options on ETFs. For SPY, I will be long 400 shares (400×377=150,800 Long position) and short 4, 0.5 delta puts expiring in 45+ days (400x.5×377 = 75,400 effectively long position). So total long is ~$226000. Am I going about it the right way so far? Now, for GLD the position represents 60,000/174 = 3.44 options contract (assuming delta 1). So represent my long position fully, I sell 10 contracts of .30 delta options expiring in ~150 days (to get the delta to 1.0)? Isn’t it much riskier on a very sudden move? My concern is that to implement a strategy that avoids tail risk, won’t this introduce another tail risk (granted that it is low probability)? I assume TLT is handled similar to GLD?

    Thanks again for your thorough and quick replies. Much appreciated.

    Raj N.

    Also Frank, on Logical Invest, the Enhanced PP strategy shows CAGR of 6% assuming it is fully invested? In your options based implementation, only 60% will be allocated to the CAGR should be approximately 6x.6 ==> 3.6% (disregarding options premiums, just straight attribution)?


    In my option example I am also 100% invested like with ETFs. I sell lower delta options, but I sell more of them to compensate the lower delta.

    Raj N.

    Thanks, this clears it. I was looking around to see if I can trade /MES instead of SPY, but noticed that the Open Interest and volume for even ATM options are really thin. Have you traded /MES and what has been your experience? Thanks again.


    I think you can trade MES without any problem. The Future and option ask/bid prices are the same as for ES, only the multiplicator is different (5 versus 50). The volume is not important as this is in fact the same Future as ES

    Raj N.

    Thanks Frank. I will give it a try. Also, with /MES I can start small.

    Raj N.

    Couple of more questions for @Frank. How far expiry do you select for the futures (not the options on futures)? At what point do you roll the future positions and do you roll to the next futures expiry or farther out? How much roll-drag does the strategy experience? Thanks.

    Frank Grossmann

    I would not buy futures with less than one month expiry. I roll about a week before expiry and as these are extremely liquid with small spreads, rolling is really not a problem. Rolling options is far more difficult as these have bigger spreads and you need to be patient to get a mid price between ask and bid.

    Raj N.

    Thank you again, sir.

    Supal Patel


    Not able to access the document you posted for options based permanent portfolio strategy. Can you please share it again?

    Supal Patel

    @Frank – I read through this article on using options based strategy with permanent portfolio and have some follow up questions:

    – Your notional value exposure is higher. To manage this and over leverage – is that the reason we have GSY / cash equivalent which is around 20-40% allocation? OR you recommend 60% of total allocation to SPY, GLD, TLT allocation to manage the leverage?

    – You mentioned that you add option layer only when SPY volatility is above 15 – is that VIX level? Do you use similar criteria for GLD and TLT volatility also? What’s that criteria?

    – Key part of this strategy is active management of dynamic deltas. Can you please elaborate your mechanics for delta adjustment? Do you adjust when your current delta exposure is +- some % range of original delta or something else?


    It’s not about leverage however if you write options you need much less of your money, so that you can invest a big part of your money in some very low risk cash like ETF like GSY to generate additional income. At today’s interest rates however, you can probably just leave it on your account.
    The 15 volatility is the VIX level. Below, I would not write put options on equity like the S&P 500. This does not apply to GLT and TLT.
    As all three ETFs do have very liquid options so that you can just roll or buy back the options to reduce portfolio delta. I would not do it too often, and wait that portfolio delta increases or decreases by about 20%, before you adjust.

Viewing 44 posts - 1 through 44 (of 44 total)
  • You must be logged in to reply to this topic.