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Hello Frank is there a strategy for mixing different leverage ratios of different asset types? If UGL gives you better results than UGLD then what is the risk of using it? Most of the Strategy’s will give you better results using UGL but since it has less volatility the percent allocated is higher than SPXL or TMF. This could be because Gold has outperformed both SPXL and TMF over the last couple of years. If the return is higher and the optimizer is stable why not use UGL?
Interested in your thoughts.
Regards,
Mark V.You can mix different leverages. I tried the strategy using UGL instead of UGLD and it works quite good, it is however quite dangerous that you create an unbalanced strategy which profits only from one asset class which performed well during the past 10 years.
Hi Frank, in order to swap in UGL for UGLD in our own QT strategies (and thus seek to replicate UGLD’s 3x leverage using a ticker with 2x leverage), would we go into Strategy Manager, pick our strategy and change the ‘Multiplier’ on the UGL ticker to 1.5 (from ‘not defined’)?
In the Consolidated Allocations, for those strategies so amended, would they then allocate 150% of UGL (instead of 100%) of the chosen/optimised ETF allocation within that strategy (thus providing a work-around for the desired leverage)?
If my understanding is incorrect, can you please explain how we can replicate in QT leveraged ETFs using unleveraged or different leverage ETFs?
Thanks
You are right .. you just have to add a factor 1.5. The problem is that QuantTrader will only apply this factor to the ETF prices and not to the investment. So if it tells you to buy 10’000$ of UGL, then you have to buy 15’000$
I see that you have generated a new release of QT – 525SJUNE2020 – that contains new versions of MYRS and UISx3 and UISx2. There are several of the portfolios in the Core and Library that used MYRS and UISx3. Are there any modifications that you plan to make to the strategy allocations in these portfolios or should we just do a straight substitute? For example Max drawdown less than 15% has an allocation of 24% to the old MYRS and 27% to UISx3. Should we just keep those % the same for the new strategies?
My understanding is that as you have to purchase 3x the amount of GLD to substitute for UGLD in order to equalise the risk with the other leveraged ETFs; in order to achieve that, you might require a significant amount of extra equity investment (i.e. being 100% of your original equity position plus the equity required for 2x extra GLD over and above your pre-existing consolidated allocation of GLD).
If, for example, you need 50% extra equity, I would then scale back all positions in the indicated consolidated allocation by 100%/150%, to get back to your original equity available. This might mean that you can only earn 100/150 of the strategy results though…
The above approach might be incorrect; perhaps someone in the LI team can provide further guidance.
I hope that the consolidated allocation table in QT can be amended at some point to allow for substitution of unleveraged ETFs for leveraged ETFs.
You have to buy 3x the amount but most probably you have a margin account. I checked on my IB account and if I buy for 100’000$ underlying gold then I need about 18’900$ margin doing this with GLD. With UGLD I need about 31’000$ and with XAUUSD (Forex London Gold) only 4’700$. So the 3x leveraged ETFs require even more margin than a 3x bigger GLD position. Best is by far Forex Gold which has very small spreads and trades nearly 24h.
So the change to 3x GLD should not restrict investors with margin accounts.Thanks Frank; I omitted to mention that my comment was in the context of a retirement fund account at IB.
I will check whether they will allow holdings on margin for such an account.
Does anyone feel strongly in favor or against using a 50% weighting to SVXY over the VXZ allocation? i.e. the strategy recommends -10% VXZ so we would just long SVXY with a 5% weighting and add the balance to cash buffer or SHY. On the surface they have similar long beta risk profiles, obviously SVXY is prone to do what it had done in 2018 as an inherent risk.
Working with a Roth account and don’t have access to short equities.
Cheers,
BrianSee comments here re SVXY.
XAUUSD would have been a good option, but it’s not available to the following folks for those who use Interactive Brokers, myself included unfortunately…
IB Spot Gold and IB Spot Silver trading is available to customers who are not legal residents of the U.S., Canada, Australia, Hong Kong or Japan.
In response to Frank’s comment about trading with margin at IB, for UK retirement funds held within a tax-exempt wrapper, IB have confirmed that margin trading is not available to such accounts, which is somewhat unfortunate as performance for leveraged QT strategies will be quite a lot lower given the requirement to match the risk of the remaining 3x tickers in the strategies.
Hopefully, some other issuer will provide 3x GLD…
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