To maintain a net 100% equity (beta) exposure. The -50% short is on global beta (think they use S&P500 and EAFE indices for the short) so for that additional 50% in the AlphaA ETFs w/ the 50% short they are only gaining exposure to the difference between that portfolio, and the global stock market. So the market could go down, but if the ETFs do better than the market plus interest, that is still a gain.RovenSkyfall wrote: ↑Tue May 04, 2021 11:21 amWhats the point of the -50% short?MotoTrojan wrote: ↑Tue May 04, 2021 10:22 am Adding momentum helps, but overall volatility and drawdown for most of their portfolios is still higher than S&P500.
Wes Gray uses his 4 ETFs at 150% leverage but with a -50% short on global beta (so net 100%), plus adds trend-following; that is a pretty interesting approach I think. Not sure I would want the trend, but the 150/-50 alone would be interesting.
Can you link the post where people are doing a 2x or 3x version? Want to make sure they have seen those probability curves. 2x or 3x SCV is even riskier than HFEA which fits somewhere around 1.6 based on beta and those probability curves.
They do the same thing with the trend following approach; VMOT ETF for example is always invested in QVAL/IVAL/QMOM/IMOM (at risk-parity weights) and then hedges using the S&P500/EAFE (believe those are the indices but same idea) shorts at 25% or 50% each (4 levels of hedging) when called for. This way even when it is fully-hedged (no market beta exposure) you still will have exposure to the value and momentum factors 100% of the time, just sometimes in a L/S format.
I don't recall the thread but there is a thread of everyone's portfolio which you can skim and you'll see a good bit of leverage.