I will never understand why this isn’t Investing 101...https://twitter.com/bennpeifert/status/1362908508237090816 …
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Why it *has* worked. Include the GFC in your back test to help sell it as a strategy. Everything is function of price.
It true. I guess what I want to know is what’s the story for why it will continue to work in the future (ie why are puts still priced low enough that they will help rather than hurt the geometric return). Is it outlier blindness (behavioral) or is there a structural reason?
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Hard to get paid on negative expected value trades that payoff once a decade.
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Which is why these are marketed on their negative covariance to a portfolio. The interesting question is how much expected value should you pay away for the diversification benefit,
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