DCA strategy during bear market

[zzTiny]

Alot people tell me wheeling cannot beat buynhold leh. But I feel it don't make sense. Isn't wheeling the best for sideways market? Not enough research I think.

How ah, I still learning options ever since October when I want to get lessen China equity desperately. Anyone got a few good options website for n00b me to learn?

 

[RedsYWNA]

Also, TS said he wants to start DCA when S&P falls at least 20%, he wants opinions on how long this should take and whether he should go for regular DCA or enhanced DCA, he didnt ask people for opinions on whether he should market time, stock pick or trade options.

When the press asks for answers to question 1, doesnt mean that you must answer them directly mah, hahaha.

My alternate answer:

Sell monthly put option at 20% S&P drop. SPLG probably the cheapest ETF to run this.

Sell monthly put options at every 8% further drop, till your war chest runs out., ie 20%, 28%, 36%, 44%, 52%.

A note that it is indeed difficult to time the market, and the algos move lightning fast. So this may not beat lump sum investing at 20% S&P drop.

 

[esca]

@TS, maybe split your capital into buckets?
B1 - DCA for remaining 2022
B2 - DCA for 2023
B3 - Lump sum anytime it hits your 20% estimation

Adjust the bucket allocation according to your beliefs, so you won't miss out the current ongoing adjustments, potential crash and etc...

 

[msflyer]

Suggestion is to dca lump sum by 6 months or 9 months. No one know exactly what is the bottom. Doubt this will be worse than covid drop in mar 2020.

and what you seem to want is buy the bigger dips which is not dca

Thank you for suggestion

 

[msflyer]

Unlike many others, looks like you have managed to avoid the double digit fall in S&P500 YTD. Congratulations on that.

If I were to do a DCA, I would start once the market is 15-17% below its peak instead of waiting for 20%. This is because even the bearish investors / traders start closing their shorts as the market approaches that 20% mark. This is what causes the market to rebound after coming so close to that 20% mark. So, its important to be bit flexible about that 20% level.

Having said the above, when FED is talking about sucking out liquidity (around 550-600B by the end of the year), risk assets should likely deflate to some extent during this period. So my period for DCA would be from May to Oct. Technically, the market always tries to retest its the previous cycle peak, which in this case in 3400. Thus, from 4100 to 3400, would be my range for the DCA.

Now, the controversial part., since I'm more into options, I would just sell cash secured puts at different strike prices (from 4000 to 3400) and different expiry dates. Based on the current elevated IVs, this should yield around 6-7% annualized return on the notional contract value. What if it doesn't drop below 4000 ? I'll be happy to earn the premiums. I'm not a FOMO person.

Thank you for suggestion

 

[msflyer]

How abt an alternate method, selling cash secured puts?

Depending on your cash reserves, sell monthly puts against the 20% S&P drop. If it drops that low, you get your shares at the assigned price.

If it doesnt, you still get some money from expired put options. Of cos, S&P ETFs are rather high for this strategy to work, so you need a warchest.

EDIT: I think SPLG is probably the cheapest S&P 500 ETF to employ this strategy. VT also not too bad......Gd luck!

Interesting suggestion. Can do via Priority Banking. But personally prefer to keep things simple.

 

[msflyer]

@TS, maybe split your capital into buckets?
B1 - DCA for remaining 2022
B2 - DCA for 2023
B3 - Lump sum anytime it hits your 20% estimation

Adjust the bucket allocation according to your beliefs, so you won't miss out the current ongoing adjustments, potential crash and etc...

Thanks for thoughts!

 

[Cupid Stunt]

You gonna start your DCA soon? You will probably hit your target by the end of the week.

 

[limster]

You gonna start your DCA soon? You will probably hit your target by the end of the week.

I don't know about TS, but I have started to buy already! Everyday buy a little, as long as IWDA is under $75!

 

[churnmaster]

When the press asks for answers to question 1, doesnt mean that you must answer them directly mah, hahaha.

My alternate answer:

Sell monthly put option at 20% S&P drop. SPLG probably the cheapest ETF to run this.

Sell monthly put options at every 8% further drop, till your war chest runs out., ie 20%, 28%, 36%, 44%, 52%.

A note that it is indeed difficult to time the market, and the algos move lightning fast. So this may not beat lump sum investing at 20% S&P drop.

Thanks. SPLG is a good find. Does it have min 90-95% positive correlation with SP500 index ?

 

[RedsYWNA]

Thanks. SPLG is a good find. Does it have min 90-95% positive correlation with SP500 index ?

I ran the analysis on portfolio visualizer.

10 year annualised return
SPLG: 13.59%
SPY: 13.56%
VOO: 13.63%

I think the tracking error is pretty decent, with AUM of USD 13 billion. Should be pretty safe fund to run options play, haha

 

[churnmaster]

I ran the analysis on portfolio visualizer.

10 year annualised return
SPLG: 13.59%
SPY: 13.56%
VOO: 13.63%

I think the tracking error is pretty decent, with AUM of USD 13 billion. Should be pretty safe fund to run options play, haha

Fantastic ! This one helps.

 

[msflyer]

You gonna start your DCA soon? You will probably hit your target by the end of the week.

Yes. When (and if) reaches my stated buying levels.

 

[Cupid Stunt]

Yes. When (and if) reaches my stated buying levels.

Less than a 100 pts to go LMAO, there is no if.

Thank you for having perseverance to stick to your plan, instead of succumbing to the FOMO like the DCA zealots here.

Value investing FTW.

 

[RedsYWNA]

why would u do options on etf that have poor spread, OI, volume?

Because dont mind being assigned at a more palatable absolute quantum?

 

[BBCWatcher]

If you're going to play with options you definitely want a viable market with high participation.

 

[zzTiny]

How you guys deciding now. The downward pressure is really strong. Even more than I expected. At this rate, might even reach 3400.

June will really go crazy. I thinking of holding off until July or Aug and see how the liquidity crunch sets in. What do you guys think.

 

[RedsYWNA]

the option value reflected are rigged because liquidity is so thin

I dont think the asking prices by the MM are really that outrageous, per option, you are looking at $10-20 difference? Personally i nv chose this, but its an option for those who prefer lower absolute quantums

 

[d5dude]

When the press asks for answers to question 1, doesnt mean that you must answer them directly mah, hahaha.

My alternate answer:

Sell monthly put option at 20% S&P drop. SPLG probably the cheapest ETF to run this.

Sell monthly put options at every 8% further drop, till your war chest runs out., ie 20%, 28%, 36%, 44%, 52%.

A note that it is indeed difficult to time the market, and the algos move lightning fast. So this may not beat lump sum investing at 20% S&P drop.

How do you know the options will be assigned? TS could end up with a 5% gain or something while the market end up +50% 3 years later.

 

[zzTiny]

No what. I thought it depends on the strike price and dte? I never see people sell options, dte until 3 years later leh. I only see people do leap if more than few months.