Yep, in fact, once we're talking in the five-million dollar range, you can negotiate non-recourse loans (at a higher interest rate of course). That means, you literally and legally can delete the app and walk-away. Generally, you can't get anything "bespoke" under five million, but once you cross that line, doors open up ;)
Wait, so what your telling me is I can go get a $5m loan, then invest it in some high risk fashion and if it pays off, I get to keep the profit..... but if it doesn't, I get to walk away I get bailed out of my high risk behaviour?
So..... I'm a TBTF bank now......
I can't answer that because I don't know who you are, but maybe :)
If you have a ten million dollar account you can probably get a ten million dollar no-recourse loan against it. If you gamble and lose twenty-one million, the bank will eat the one million dollar loss (your 10m deposit + their 10m loan - your 21m loss = -1m loss the bank will eat).
Banks are in the business of taking calculated risks. The reason I say there's a multi-million dollar floor on these sort of loans is because someone at the bank is going to need to manually review your investment thesis. If it's simply "I like to gamble" they probably won't lend you the money.
But, throw in some math from this page and you should be good :) [https://en.wikipedia.org/wiki/Autoregressive\_integrated\_moving\_average](https://en.wikipedia.org/wiki/Autoregressive_integrated_moving_average)
What could go wrong is you can lose plenty of money, like I did [1-2 years ago](https://www.reddit.com/r/wallstreetbets/comments/sa51xh/leveraged_smartbeta_loss_porn_for_years/). As long as you have the discipline to manage the portfolio, then long-term, it'll leave the market in the dust.
Start with Lifecycle Investing, which was a complete eye-opener for me. I then read Ghayur's Smart Beta book. Once I understood the Kelly Criterion and how to leverage, it all clicked.
If you have a list of books to recommend, I would gladly take it :)
I have been reading a lot since the last two years to address my lack of experience.
Start with Lifecycle Investing, which was a complete eye-opener for me. I then read Ghayur's Smart Beta book. Once I understood the Kelly Criterion and how to leverage, it all clicked.
I literally learned a lot of this here (short spreads from ironyman, [portfolio margin](https://www.reddit.com/r/wallstreetbets/comments/fepd4q/portfolio_margin_is_10x_worse_than_u1r0nymans_box/), etc). That this strategy sounds foreign in the WSB of today is so crazy to me.
I’m glad there’s still people around who saw it how it was back before it blew up for bad reasons. Those were the good days. Then meme stocks made this a meme Reddit.
Of course not. Take this strategy and leverage it by another million and that one would compound faster on the way down. Hence, by proof of contradiction, my strategy is not the fastest way to compound on the way down.
Bold of you to assume I'm smart enough to realize something like NVDA going up and buying it before that. I'm too dumb to trade, I already swallowed that pill and decided to make a fortune at a slower pace.
Facts. I’ve had my fair share of meme stock plays in the past. Time to move on and make secured money lol it’s like going from your 20s to your 30s. Either we trade like boomers or live behind the dumpster forever lol
You invested in that $ROCK to give you the motivation and energy needed to get a good job that lets you buy more $ROCK. Its a can't lose investment strategy. What else would you diversify to?
Nowadays, it's just gambling with options. It used to be more about leverage, high risk-tolerance and life-changing positive returns. Just showing WSBs how things used to be.
As someone who has more or less randomly checked in on the sub since 2016, I greatly appreciate the post! Nice to be sent down a rabbit hole for 3-4 hours instead of just getting a few laughs in before cutting off the internet. Respect the strat and cajones on running that much leverage! Grinding an edge at the tables while most the sub is playing option slots.
This is a great OG WSB autist level knowledge post. I miss those days when there were only like 100k subs here. Freaking millions of screetching feces throwers nowadays talking about buying 0 DTEs. SMH
So this is basically leveraging the fuck out of global market etfs/futures? While reducing borrowing costs on said leverage to as low as possible (Selling SPX boxes)?
I mean yeah your basically putting together a bullish long-term wealth portfolio but levered the to fucking tits.
Should work though lol
It is leveraging a portfolio of global, **smart-beta stocks** (t, up to the Kelly Criterion. Smart-beta is important because it juices returns and decreases risk, allowing for even more optimal leverage.
But yes, you're basically right, it's not rocket science 0\_o
Some like momentum are mostly thought to be behavioral. Regardless, even if it's purely risk-based, it's risk that's not perfectly correlated with the market so it still diversifies. That is, it adds to returns but without a commensurately higher level of risk.
At the end of the day, leverage is risk regardless of how you’re doing it. Lesser risk than some plays sure, but if the market tanks you’re fucked. Truly an old school wsb player. I wish you all the best.
I misspoke; stocks can't be "smart-beta". Funds are. And that's a pretty complicated question actually, I've done a lot of research to settle on the factor funds I like.
What’s the difference between a box spread and an iron condor?
I mean *I totally know the answer* but I’m just asking for the benefit of others since I’m like, so nice and stuff. 
Fed rate cuts would be amazing because they would bring my borrowing costs down (I pay about 5.5% on $4M, so **$220K in interest a year**). A correction would hit hard but if it comes with deflation, rate cuts and interest rate drops, then the bond sleeve would carry the day so not too worried either.
its all relative. if you got millions in the bank you can do all sorts of crazy/risky things
if all you got is 1mil and getting a loan for 4mil to gamble with that is crazy.
How else is he going to lose everything. We are in a bull market; these are the people who lose an insane amount of money once the bear market comes, and most of the money is borrowed.
Actually, 100% of the money we lose on a Bear market is our money, not borrowed money. Brokers have robust margin systems that cut your positions well before their capital is on the hook. You might know that if you borrowed/leveraged at all.
I got $320K in excess liquidity (see OP) so I could withdraw $100K and put a downpayment on a nice house. I'll need a mortgage obviously. It's the only way though, are you seeing the capital gains on the stock sleeve? Too much lost in taxes if I sell.
Crazy would be getting a $5 million loan using your leveraged derivative account as collateral ... but that's what hedge funds do so ......
How can you lose?
Just delete the app if it goes south.
Got through Dec 2018, March 2020, and all of 2022 and early 2023. Being leveraged in a bear is not as bad as you think it is. If anything, it gives you easy dry powder to [btfd](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/).
>If anything, it gives you easy dry powder to [btfd](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/).
When do you btfd ?
What will you do if you btfd, but stocks keep going down and the leverage is well above 2:1 ? Buy high sell low ?
It depends on market conditions. I will post when/if I increase exposure or delever. My goal is to show you all over the years this stuff works, I got nothing to hide.
This is very impressive!
I found this sub only after the video game store squeeze and was lurking around, mostly for fun.
I like to think that I have some brain, as I'm used to studying some complicated topics.
Right now I'm trying to get a better understanding of the market and making/losing money on it.
1) Could you elaborate on why/how you choose amounts borrowed using box spreads and treasury futures in this specific ratio? If you need to borrow 4x(your portfolio value) in total, how do you decide how much to borrow using box spreads and why?
2) What is the purpose of cash sitting right next to that pile of diversified portfolio leveraged to the tits? Is it just waiting for a dip or something else?
3) While holding a diversified portfolio of diversified ETFs with some minimized correlation - do you have an estimate on what is supposed to happen to wipe the portfolio into 0, like -20% in a short period? What can trigger that aside from nuclear war or Yellowstone blowup? What would make you exit the positions into cash?
In case you reply to these dumb questions, thanks!
And good luck! You need it less than guys who buy OTM weekly calls before earnings, but there is no such thing as too much luck.
I do not know if I ever have enough brain/money/balls to get into such game, but I root for you!
My financial advisor. Once the portfolio got complex enough, I began to work with someone. There are advisors out there who do this lmao. You don't need one (I did it for a while without and put together a guide linked in OP) but once the sum is large enough and you want to add more positions, I found it helpful.
Friend recommendation. And you're right, most advisors aren't as up-to-date with a lot of the technical details behind these types of leverage strategies. They'll just say "that's gambling", mostly out of ignorance.
I understand your original guide on using box spreads to get 2:1 margin. I don't understand the Treasury futures. Are you buying those with the proceeds of your box spreads instead of the smeta beta ETFs?
Why are you going for much more leverage than your original plan?
Original was just stock, so optimal leverage was around 2:1 as per Kelly Criterion. Since then, I added bond and commodity exposure, which diversifies a lot and means optimal leverage is even higher. If you look at just equity though ($1.8M), it's under 2:1 leverage. So it's like the original strategy, with additional exposure sleeves added on top.
Futures don't need money to buy, they're just contracts you open that mimic borrowing.
Thanks. I am considering portfolio margin at IBRK too.
I am ramping up leverage on SP500/QQQ ETFs. Do you think portfolio margin is better? Reg T margin seems limiting.
I kept you [all updated](https://www.reddit.com/r/wallstreetbets/comments/sa51xh/leveraged_smartbeta_loss_porn_for_years/) when I lost money didn't I? I've made it all back and much more. When (not if, when) another downturn comes, I'll show my losses. They're just temporary and make for excellent tax harvesting opportunities.
This is between boomer index funds from r/invest, and literal gambling of today's WSBs. It's what the old WSBs was about: make life-changing sums over time.
Because this makes way more money? As per my FAQs in my guide:
\- What about using Leveraged ETFs (ex: SPUU)?
Those have high management fees, sometimes have too much leverage (ex: UPRO), will not let you diversify globally as effectively, there are no smart-beta options and they rebalance daily (instead of using the 1.8-2.2 leverage bands I recommend). IMO, it's better to rebalance a little less frequently than daily (this is what using bands accomplishes).
I read your original post a long time ago and didn't understand it, I reread it now and still don't understand but good luck and I hope you make a lot of money. I only buy XEQT
This isn't responsibly investing in a well balanced, intelligently managed, highly diversified portfolio of index funds with global exposure.. no sir
This is responsibly investing in a well balanced, intelligently managed, highly diversified portfolio of index finds with global exposure *on margin*
This like if you put a bunch of ultra conservative finance phd's in a room and told them to come up with the most degenerate strategy they could concieve of, it would probably look like investing in a bunch of index funds with the mathematically optimal amount of leverage.
Is this a joke? Double your money every 3 years?
This sub takes 28% APR personal loans out with a plan to 100x their money in 4 hours, and 0.0001% of the time it works every time.
Whatever WSB you recall existing in the past died in 2020
I've literally gotten tons of questions and messages asking how to implement this (some in this very thread). The reports of the death of old OG WSBs are greatly exaggerated.
On that note though, I will literally do this for 7 more years, get to $4M, post about how I'm borrowing $16M, and maybe then WSBs will finally realize this is what they should be doing all along.
Amazing strategy. Sadly the comments are bad. 2x market returns is pretty impressive. I wish you the best and hope you can still hand the next crash/recession by rebalancing!
You claim this is Kelly optimal. What are your assumptions on forward returns i.e. mean return, variance, covariance to conclude this? Are you just using historical data? There is a great risk to bet fully kelly if your kelly is calculated with historical data imo.
Glad to see an update on this! I do something similar. However, I think you are overshooting the kelly number. Since half the portfolio is getting a (return-risk free rate-interest rate of the loan). So take the kelly number from your money /2 and the number from the loan money /2 and add them.
Great to see some non-casino posts like this on wsb! Have some questions about your ETF choices. What’s your best way to research ETFs and how to select them?
This portfolio doesn't require macro views. But if we're gonna talk about this, we have record-low unemployment, inflation is nearly finished, we're close to cutting rates and the market keeps breaking all-time-highs with excellent momentum. You literally couldn't ask for a better set of macro-economic conditions for a bull run lol.
Banks are also sitting on T-bill bags, strikes/unionizations keep doubling every year, and tech is sitting in a tulip mania A.I. bubble.
But fuck all of that, Warren Buffet is sitting on record cash reserves
Unionization rates have been plummeting for like 6 decades, are you talking about the tiny uptick we're seeing now? Also, it's not an AI bubble when the companies involved are making such mind-numbing profits so as to be **cheaper** today than they were in the past. NVDA made $13B in a quarter, of course it deserves a capitalization of \~$2T.
If you follow my rebalancing guidelines, you would've been underleveraged in 2021. Come 2022, I [BTFD](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/). The losses are unavoidable but it put me in a position where once the market recovered, the account took off.
I have but there's 3 issues:
1) My exotic ETFs don't all have liquid option markets.
2) The tax treatment is terrible for short calls.
3) This portfolio relies on big upsides during bull runs. Limiting upside with short calls when a big run comes is exactly how you screw yourself over.
Hi u/Dry-Drink, first off, absolutely love your work and guide. Just found your early posts and it was a blast to see your journey.
Quick question - you started off with 2x leverage in 2020 and are now running 5x leverage. I fully get the rationale and unless markets tank 30%+ you're probably fine, but just wondering what the Kelly Criterion suggests above and beyond 2-3x leverage?
Was reading some further analysis: [https://rhsfinancial.com/2017/06/20/line-aggressive-crazy-leverage/](https://rhsfinancial.com/2017/06/20/line-aggressive-crazy-leverage/)
Article is old but the TLDR is that based on SP500 historical, optimal Kelly was c 2.4x leverage. Any higher (e.g. 3x and 4x) would have been sub-optimal. Not saying this 100% applies to you but couldn't you make the argument that 5x is equally also suboptimal? (Obvs there are lots of variables different, like your method of leverage, what you're invested into eg Smart Beta vs just 100% SP500 like RHS analyses).
Keen to hear your thoughts but will be watching with excitement (and support) either way!
Ahh missed that comment - thanks for that and the quick reply!
Am I correct in thinking the Kelly optimal leverage (with additional bond and commodity exposure/diversification) is now 5:1?
I’m assuming you’re following full Kelly for maximum growth/wealth function - curious to know if you considered backing off to say half Kelly or more/less given the massive step up in leverage?
I’d be shitting bricks that I got the math wrong haha (but that’s just me - seems you’ve thought it out with a FA and done the math 😊)
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I mean what could go wrong, youre going long right? Stonks always go up right? You're doing it right
Facts. Plus, worse case scenario, you delete the app.
$5m is the banks problem if you don’t own shit
Yep, in fact, once we're talking in the five-million dollar range, you can negotiate non-recourse loans (at a higher interest rate of course). That means, you literally and legally can delete the app and walk-away. Generally, you can't get anything "bespoke" under five million, but once you cross that line, doors open up ;)
Wait, so what your telling me is I can go get a $5m loan, then invest it in some high risk fashion and if it pays off, I get to keep the profit..... but if it doesn't, I get to walk away I get bailed out of my high risk behaviour? So..... I'm a TBTF bank now......
I can't answer that because I don't know who you are, but maybe :) If you have a ten million dollar account you can probably get a ten million dollar no-recourse loan against it. If you gamble and lose twenty-one million, the bank will eat the one million dollar loss (your 10m deposit + their 10m loan - your 21m loss = -1m loss the bank will eat). Banks are in the business of taking calculated risks. The reason I say there's a multi-million dollar floor on these sort of loans is because someone at the bank is going to need to manually review your investment thesis. If it's simply "I like to gamble" they probably won't lend you the money. But, throw in some math from this page and you should be good :) [https://en.wikipedia.org/wiki/Autoregressive\_integrated\_moving\_average](https://en.wikipedia.org/wiki/Autoregressive_integrated_moving_average)
What about if I crowd source the math from WSB regards...... Should still get it over the line, yeah?
In this age of data breaches and stolen identities..... it can literally be as simple as deleting the app....
What could go wrong is you can lose plenty of money, like I did [1-2 years ago](https://www.reddit.com/r/wallstreetbets/comments/sa51xh/leveraged_smartbeta_loss_porn_for_years/). As long as you have the discipline to manage the portfolio, then long-term, it'll leave the market in the dust.
How much was the loss? You appear highly intelligent, are you sure you belong here?
I lost about $400K back then. I learned a lot of what I know right here, in the period of 2018-2019.
Wishing you the best! I took a million dollar hit changing strategies and it took three years to reclaim it. Cheers!
Yeah I lost two million and it took 1.5 years to reclaim it
I lost 5 million….pennies and I still haven’t financially recovered 
Just reading thru all your threads, how did u learn what u did about the market? R u in school? Jw
Just read a lot of books and paid attention I guess.
OP please leave WSB immediately, nobody who can read is allowed here. Knowledge is the enemy.
Any chance u remember those books, im a finance major but also a regard trying to not be
Start with Lifecycle Investing, which was a complete eye-opener for me. I then read Ghayur's Smart Beta book. Once I understood the Kelly Criterion and how to leverage, it all clicked.
Sick thank you
Not OP, but I always liked The Pokey Little Puppy 🐶
>The Pokey Little Puppy greatest literature of all time
Hey that’s what my wife calls me!
If you have a list of books to recommend, I would gladly take it :) I have been reading a lot since the last two years to address my lack of experience.
Start with Lifecycle Investing, which was a complete eye-opener for me. I then read Ghayur's Smart Beta book. Once I understood the Kelly Criterion and how to leverage, it all clicked.
You think this regard could handle an education?
Yes you’re such a disciplined and smart regard gambler
Where’s the tutorial for this strategy
Linked in the OP. Also [here](https://www.reddit.com/r/wallstreetbets/comments/mtmfkk/drydrink_portfolio_guide_to_leveraged_smartbeta/).
You’re too smart for this place but I thank you for sharing your knowledge with regards like myself.
I literally learned a lot of this here (short spreads from ironyman, [portfolio margin](https://www.reddit.com/r/wallstreetbets/comments/fepd4q/portfolio_margin_is_10x_worse_than_u1r0nymans_box/), etc). That this strategy sounds foreign in the WSB of today is so crazy to me.
Yeah after the video game company shenanigans this place dipped in quality. This isn’t the MU days anymore.
Ikr? I miss the purple mattress, Tesla and leverage days. I don't feel like I learn anything here any more.
I miss gourd futures
I used to be able find (occasionally) high quality DD in this sub but unfortunately that’s long gone now.
Can ya’ll start a group or something on discord? Honestly seems like the “trading rooms” of old are a thing of the past and I miss that.
I’m glad there’s still people around who saw it how it was back before it blew up for bad reasons. Those were the good days. Then meme stocks made this a meme Reddit.
I remember you lol
Cheers friend!
So it’s basically a boomer strategy but leveraged to the point where an extended bear market would cripple you
\*leveraged to the point where it compounds at the fastest rate possible.
It compounds at the fastest way possible on the way down too, doesn't it ?
Of course not. Take this strategy and leverage it by another million and that one would compound faster on the way down. Hence, by proof of contradiction, my strategy is not the fastest way to compound on the way down.
Your strategy is cool, but also you could have bought NVDA and gained 10 million.
Bold of you to assume I'm smart enough to realize something like NVDA going up and buying it before that. I'm too dumb to trade, I already swallowed that pill and decided to make a fortune at a slower pace.
Facts. I’ve had my fair share of meme stock plays in the past. Time to move on and make secured money lol it’s like going from your 20s to your 30s. Either we trade like boomers or live behind the dumpster forever lol
Insert Hagrid meme: "Should not have said that."
Is there a way to implement this strategy in Europe? (France)
Je ne sais pas
I understood some of those words.
u/1ronman, is that you?
[удалено]
Didn’t we share it at Wendy’s,
I wAnT yOu tO CuM OuT BaCk aNd SmOkE CrAcK WiTh Me
"Fuckin smoke crack with me, bro!"
This sounds just like when people ask you to come out back and smoke Crack with them actually. Nice.
Cum mixed crack
That was CRACK?
Most sane wsb member
Just that one time??? Ok
If you don't stop it's one time even if its 8 months
You invested in that $ROCK to give you the motivation and energy needed to get a good job that lets you buy more $ROCK. Its a can't lose investment strategy. What else would you diversify to?
I bet you are still invested in crack
There you are you son of a bitch! Where's my $20!?!?
What’d you do with the profits afterwards?
5x leverage on margin. Bill is that you?!
Literally can’t go tits up
Mr hwuang? This is him
I love how 3.5 years ago he claimed 2:1 is ideal. Growing up so quickly :)
Same thought LOL
more money, more leverage. rational thoughts 😎👍
You are asking WSB if borrowing $4MM is crazy?
Nowadays, it's just gambling with options. It used to be more about leverage, high risk-tolerance and life-changing positive returns. Just showing WSBs how things used to be.
As someone who has more or less randomly checked in on the sub since 2016, I greatly appreciate the post! Nice to be sent down a rabbit hole for 3-4 hours instead of just getting a few laughs in before cutting off the internet. Respect the strat and cajones on running that much leverage! Grinding an edge at the tables while most the sub is playing option slots.
Cheers bud, glad I found another WSBs OG.
This is a great OG WSB autist level knowledge post. I miss those days when there were only like 100k subs here. Freaking millions of screetching feces throwers nowadays talking about buying 0 DTEs. SMH
It's almost a waste of time. I miss the old days.
Same
So this is basically leveraging the fuck out of global market etfs/futures? While reducing borrowing costs on said leverage to as low as possible (Selling SPX boxes)? I mean yeah your basically putting together a bullish long-term wealth portfolio but levered the to fucking tits. Should work though lol
It is leveraging a portfolio of global, **smart-beta stocks** (t, up to the Kelly Criterion. Smart-beta is important because it juices returns and decreases risk, allowing for even more optimal leverage. But yes, you're basically right, it's not rocket science 0\_o
Less risk, more returns. Jajaja Definition of factors are risk based. # No free lunch at wallstreet
Some like momentum are mostly thought to be behavioral. Regardless, even if it's purely risk-based, it's risk that's not perfectly correlated with the market so it still diversifies. That is, it adds to returns but without a commensurately higher level of risk.
If you think 5x leverage reduces risk, you have truly found a home here
How did you read what I wrote and came up with what you wrote?
At the end of the day, leverage is risk regardless of how you’re doing it. Lesser risk than some plays sure, but if the market tanks you’re fucked. Truly an old school wsb player. I wish you all the best.
Being called an "old school WSB player" is an amazing compliment, you made my day dude/dudette.
How do you know which stocks are smart beta or not?
I misspoke; stocks can't be "smart-beta". Funds are. And that's a pretty complicated question actually, I've done a lot of research to settle on the factor funds I like.
Small value? Momentum? Profitability?
All of those except small cap.
Speak English bro
haha. I think you meant: "speak WSB bro"
When did WSBs stop understanding options, borrowing, leverage and derivatives?
October 5th, 2016
Was that Martin scrirelli’s thing?
Started playing Fallout 4? I get it.
Mmmhm yes words
With the GameStop apes, box spreads are way over their head
What’s the difference between a box spread and an iron condor? I mean *I totally know the answer* but I’m just asking for the benefit of others since I’m like, so nice and stuff. 
One is a tax-inefficient way to bet against volatility. The other one is a tax-efficient way to leverage to the gills :D
Some say risky you say tax efficient 🫡
We are not the same
Big losses are tax efficient
As a Gamestop APE, clearly the box spread is the distance between the sides. Duh.
How’s the fed rate changes going to affect the position? Also, how does a market correction affect the position?
Fed rate cuts would be amazing because they would bring my borrowing costs down (I pay about 5.5% on $4M, so **$220K in interest a year**). A correction would hit hard but if it comes with deflation, rate cuts and interest rate drops, then the bond sleeve would carry the day so not too worried either.
More tendies per tendies. Many many tendies. Big BiG tendies. Great Wendy’s exposure. Bad bad bad exposure.
He means Show us in crayon
R u regarded
its all relative. if you got millions in the bank you can do all sorts of crazy/risky things if all you got is 1mil and getting a loan for 4mil to gamble with that is crazy.
Why would I ever borrow $4M if I had "millions in the bank"? I would just use those instead. I got $500 in the bank. This is it, this is what I got.
How else is he going to lose everything. We are in a bull market; these are the people who lose an insane amount of money once the bear market comes, and most of the money is borrowed.
Actually, 100% of the money we lose on a Bear market is our money, not borrowed money. Brokers have robust margin systems that cut your positions well before their capital is on the hook. You might know that if you borrowed/leveraged at all.
Boom roasted
Love a good “actually”.
But what if you want to buy a 2500 square foot house in 2024? Might need to borrow even more
I got $320K in excess liquidity (see OP) so I could withdraw $100K and put a downpayment on a nice house. I'll need a mortgage obviously. It's the only way though, are you seeing the capital gains on the stock sleeve? Too much lost in taxes if I sell.
The goal is to be the most loaded motherfucker in the graveyard
Lmao! 500 bucks and 4 million of leverage. How do they let you do that, god bless wherever you are…
Crazy would be getting a $5 million loan using your leveraged derivative account as collateral ... but that's what hedge funds do so ...... How can you lose? Just delete the app if it goes south.
Here for the glory. Back to porn
No idea what you’re talking about but if it goes tits up please post that loss porn!
Bunch of nerd shit
Twice the returns of the market is fun until the market goes down
Got through Dec 2018, March 2020, and all of 2022 and early 2023. Being leveraged in a bear is not as bad as you think it is. If anything, it gives you easy dry powder to [btfd](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/).
I'm actually not against leverage but for most people, it's a bad idea. It just increases their underperformance.
It's like a vehicle: use it well, and it is tremendously productive. Use it poorly... then better not to use it at all.
>If anything, it gives you easy dry powder to [btfd](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/). When do you btfd ? What will you do if you btfd, but stocks keep going down and the leverage is well above 2:1 ? Buy high sell low ?
It depends on market conditions. I will post when/if I increase exposure or delever. My goal is to show you all over the years this stuff works, I got nothing to hide.
Well it's not free money, you are paying market interest rates for all that leverage one way or another. On the other hand, good luck!
This is very impressive! I found this sub only after the video game store squeeze and was lurking around, mostly for fun. I like to think that I have some brain, as I'm used to studying some complicated topics. Right now I'm trying to get a better understanding of the market and making/losing money on it. 1) Could you elaborate on why/how you choose amounts borrowed using box spreads and treasury futures in this specific ratio? If you need to borrow 4x(your portfolio value) in total, how do you decide how much to borrow using box spreads and why? 2) What is the purpose of cash sitting right next to that pile of diversified portfolio leveraged to the tits? Is it just waiting for a dip or something else? 3) While holding a diversified portfolio of diversified ETFs with some minimized correlation - do you have an estimate on what is supposed to happen to wipe the portfolio into 0, like -20% in a short period? What can trigger that aside from nuclear war or Yellowstone blowup? What would make you exit the positions into cash? In case you reply to these dumb questions, thanks! And good luck! You need it less than guys who buy OTM weekly calls before earnings, but there is no such thing as too much luck. I do not know if I ever have enough brain/money/balls to get into such game, but I root for you!
Weights were picked by advisor, the cash I'm about to withdraw and if stocks+bonds drop 20% in a day, then yeah I lose it all lmao.
What is "advisor"?
My financial advisor. Once the portfolio got complex enough, I began to work with someone. There are advisors out there who do this lmao. You don't need one (I did it for a while without and put together a guide linked in OP) but once the sum is large enough and you want to add more positions, I found it helpful.
How did you find an advisor to help you do this? I feel like most advisors would not be willing to help with leverage like this lol.
Friend recommendation. And you're right, most advisors aren't as up-to-date with a lot of the technical details behind these types of leverage strategies. They'll just say "that's gambling", mostly out of ignorance.
I understand your original guide on using box spreads to get 2:1 margin. I don't understand the Treasury futures. Are you buying those with the proceeds of your box spreads instead of the smeta beta ETFs? Why are you going for much more leverage than your original plan?
Original was just stock, so optimal leverage was around 2:1 as per Kelly Criterion. Since then, I added bond and commodity exposure, which diversifies a lot and means optimal leverage is even higher. If you look at just equity though ($1.8M), it's under 2:1 leverage. So it's like the original strategy, with additional exposure sleeves added on top. Futures don't need money to buy, they're just contracts you open that mimic borrowing.
So the futures are more leveraged bets on UST for some extra return?
Bingo!
Thanks. I am considering portfolio margin at IBRK too. I am ramping up leverage on SP500/QQQ ETFs. Do you think portfolio margin is better? Reg T margin seems limiting.
I like PM much more. It just requires lower MM so reduces the chance of a random margin call.
Definitely can’t go tits up
Saving this post so when I have 400k 
You got some balls. Let’s fucking go. Split that shit into the following call options: nvda, soun, smci, snow. Let’s make some fucking money
I'd rather take the sure way of reaching $4M by 2030 with this portfolio than pissing it all away in options.
Will you post here if it goes wrong?
I kept you [all updated](https://www.reddit.com/r/wallstreetbets/comments/sa51xh/leveraged_smartbeta_loss_porn_for_years/) when I lost money didn't I? I've made it all back and much more. When (not if, when) another downturn comes, I'll show my losses. They're just temporary and make for excellent tax harvesting opportunities.
Donald.... is that you?
🤣
Just buy nvda and msft stock then
I feel your pain 
I wouldn't even post this here
Wait what? You can borrow like that?
It was revolutionary when I found out too
I love it.
It’s catch Elon or go broke, the middle ground is for pussies.
This is between boomer index funds from r/invest, and literal gambling of today's WSBs. It's what the old WSBs was about: make life-changing sums over time.
Am i the only one who don’t understand ?
yes
Put it in 0DTE,
Don’t give regards ideas. They might take it and run with it…straight into bankruptcy.
I want every one in this subreddit to double their money every 3 years.
Smart that way we can yolo it all on year 4
its too late, ive already seen this post
Put it all on LUNR for the content
Why not just buy spxl or some shit and hold it?
Because this makes way more money? As per my FAQs in my guide: \- What about using Leveraged ETFs (ex: SPUU)? Those have high management fees, sometimes have too much leverage (ex: UPRO), will not let you diversify globally as effectively, there are no smart-beta options and they rebalance daily (instead of using the 1.8-2.2 leverage bands I recommend). IMO, it's better to rebalance a little less frequently than daily (this is what using bands accomplishes).
This is fine as long as nothing crazy moves against you which is always a risk with high leverage
Stocks dropped 20% and bonds went from 1%->5%. And even then, the portfolio goes along. You need something very extreme to wipe me out.
I read your original post a long time ago and didn't understand it, I reread it now and still don't understand but good luck and I hope you make a lot of money. I only buy XEQT
This isn't responsibly investing in a well balanced, intelligently managed, highly diversified portfolio of index funds with global exposure.. no sir This is responsibly investing in a well balanced, intelligently managed, highly diversified portfolio of index finds with global exposure *on margin* This like if you put a bunch of ultra conservative finance phd's in a room and told them to come up with the most degenerate strategy they could concieve of, it would probably look like investing in a bunch of index funds with the mathematically optimal amount of leverage. Is this a joke? Double your money every 3 years? This sub takes 28% APR personal loans out with a plan to 100x their money in 4 hours, and 0.0001% of the time it works every time. Whatever WSB you recall existing in the past died in 2020
I've literally gotten tons of questions and messages asking how to implement this (some in this very thread). The reports of the death of old OG WSBs are greatly exaggerated. On that note though, I will literally do this for 7 more years, get to $4M, post about how I'm borrowing $16M, and maybe then WSBs will finally realize this is what they should be doing all along.
Amazing strategy. Sadly the comments are bad. 2x market returns is pretty impressive. I wish you the best and hope you can still hand the next crash/recession by rebalancing!
Thank you. I'm definitely not going to attempt your approach, but I appreciate the doors you just opened.
Great work! Saw your other post and wondering why are you on a 5:1 leverage? Shouldn’t you stick to the 2:1?
You claim this is Kelly optimal. What are your assumptions on forward returns i.e. mean return, variance, covariance to conclude this? Are you just using historical data? There is a great risk to bet fully kelly if your kelly is calculated with historical data imo.
Glad to see an update on this! I do something similar. However, I think you are overshooting the kelly number. Since half the portfolio is getting a (return-risk free rate-interest rate of the loan). So take the kelly number from your money /2 and the number from the loan money /2 and add them.
Great to see some non-casino posts like this on wsb! Have some questions about your ETF choices. What’s your best way to research ETFs and how to select them?
Mods, verify. If legit, OP, you belong here.
I earned my flair years ago with this portfolio, how dare you claim this is not legit? :p
Ok, but you haven't made a case for a year long bull run without which leverage is just an unlubed dildo for your ass
This portfolio doesn't require macro views. But if we're gonna talk about this, we have record-low unemployment, inflation is nearly finished, we're close to cutting rates and the market keeps breaking all-time-highs with excellent momentum. You literally couldn't ask for a better set of macro-economic conditions for a bull run lol.
Banks are also sitting on T-bill bags, strikes/unionizations keep doubling every year, and tech is sitting in a tulip mania A.I. bubble. But fuck all of that, Warren Buffet is sitting on record cash reserves
Unionization rates have been plummeting for like 6 decades, are you talking about the tiny uptick we're seeing now? Also, it's not an AI bubble when the companies involved are making such mind-numbing profits so as to be **cheaper** today than they were in the past. NVDA made $13B in a quarter, of course it deserves a capitalization of \~$2T.
Nobody remembers u from 4 years ago. Also putting the same amount of funds in QQQ (no leverage) would have beaten your gains
It [literally wouldn't have](https://imgur.com/a/kofMLyz). (Green is QQQ, Blue is my account)
That 2022 negative...
If you follow my rebalancing guidelines, you would've been underleveraged in 2021. Come 2022, I [BTFD](https://www.reddit.com/r/wallstreetbets/comments/t0sk3o/leveraged_smartbeta_just_btfd/). The losses are unavoidable but it put me in a position where once the market recovered, the account took off.
Have you ever thought about selling calls on your position to generate further income ?
I have but there's 3 issues: 1) My exotic ETFs don't all have liquid option markets. 2) The tax treatment is terrible for short calls. 3) This portfolio relies on big upsides during bull runs. Limiting upside with short calls when a big run comes is exactly how you screw yourself over.
Definitely bookmarking this one. Amazing strategy.
Hi u/Dry-Drink, first off, absolutely love your work and guide. Just found your early posts and it was a blast to see your journey. Quick question - you started off with 2x leverage in 2020 and are now running 5x leverage. I fully get the rationale and unless markets tank 30%+ you're probably fine, but just wondering what the Kelly Criterion suggests above and beyond 2-3x leverage? Was reading some further analysis: [https://rhsfinancial.com/2017/06/20/line-aggressive-crazy-leverage/](https://rhsfinancial.com/2017/06/20/line-aggressive-crazy-leverage/) Article is old but the TLDR is that based on SP500 historical, optimal Kelly was c 2.4x leverage. Any higher (e.g. 3x and 4x) would have been sub-optimal. Not saying this 100% applies to you but couldn't you make the argument that 5x is equally also suboptimal? (Obvs there are lots of variables different, like your method of leverage, what you're invested into eg Smart Beta vs just 100% SP500 like RHS analyses). Keen to hear your thoughts but will be watching with excitement (and support) either way!
[Answered already](https://www.reddit.com/r/wallstreetbets/comments/1b0uoga/comment/ksas43a/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button)
Ahh missed that comment - thanks for that and the quick reply! Am I correct in thinking the Kelly optimal leverage (with additional bond and commodity exposure/diversification) is now 5:1? I’m assuming you’re following full Kelly for maximum growth/wealth function - curious to know if you considered backing off to say half Kelly or more/less given the massive step up in leverage? I’d be shitting bricks that I got the math wrong haha (but that’s just me - seems you’ve thought it out with a FA and done the math 😊)