The Doctrine of the Golden Mean
Seeds were planted in the year of 2016 when a group of friends established an investment club in Silicon Valley, California. We are pupils of Confucius and authentic believers of "the doctrine of the golden mean". Unsurprisingly, our observations proved that daily movements of S&P 500 indeed have a mean very close to 0, even in the bear market of 2022. We stick to the path of market neutrality, aka delta neutral, through the bumpy bear and bull markets.
"Time is Money"
Our portfolio is designed to minimize the downside risk when the market declines, by adding some negative or bearish exposure to balance our other assets, such as IRAs, 401K, 403B, 529 and etc., that tend to follow the S&P 500. Our strategy is based on the principle of "time is money", as Benjamín Franklin wrote, and it aims to capture the time value (hence the name), or theta, that decays rapidly when options are close to expiration.
Outperformed SPX 102% in 2022 With the Rise of 0DTE
In April 2022, the CBOE introduced Tuesday and Thursday expiration options for the S&P 500 index, opening up new possibilities for 0 Day To Expiry (0DTE) options trading. This solved a long-standing problem and created a huge opportunity for our theta-based strategy. Our profit increased dramatically while keeping our exposure to VIX, the S&P 500 volatility index, very low. In other words, we achieved our objective of a high alpha and a slightly negative beta, meaning that our portfolio is negatively correlated with the S&P 500. In 2022, our portfolio's net annual return was 82.78%, outperforming the S&P 500 by a wide margin.
We believe our prime time is yet to come as more and more 0DTE options emerge. Today, we are converting the investment club into a hedge fund.