Forum Replies Created
- Posts
You’re welcome. If it wasn’t for the short history of CAOS it would make for a very good alternative hedge product in LI’s strategies.
Have you checked on AlphaArchitect’s website how the underlying strategy works? CAOS really only works well if we have a sudden crash and explosion of volatility. This is how the crash puts will protect you. If instead markets grind lower like in 2022 and vol rises but does not spike than the strategy will constantly lose with the put spreads but not have the offset from the crash put. It is important to understand what the limitations of such products are.I think Frank answered the other question. Most of the strategies built on LI have the same hedge component built into them. The Top 3 picks the best strategy which in turn all have the same hedge component built into it. If the hedge strategy on its own selects gold you will have that gold allocation over all top 3 strategies and that is why the total gold allocation becomes as large.
Whether gold is a true hedge or just another asset class is another discussion.
You might want to look into the CAOS ETF which is a true hedge but has a positive carry, so no losses while you wait for the crash to happen. You just need quite a large allocation to compensate for losses on the equity market. CAOS to me could be an alternative to GSY, same or higher cash return with a long vol kicker.
