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PaperclipPerfector  1mo ago (text post)   2787 thread views

Friday Fun Thread for May 1, 2026

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I've recently been getting into fixed-income investing as a way to learn by doing. I'm investing a little bit of money each month (that I can afford to lose). If my after tax yield is a full 1% higher than I could get from my HYSA over a six month time period, with no principal loss of >5% over any thirty day window, I'll say that I have a layman's grasp on the topic. If not, I'll have to figure out what I did wrong.

So far I've been floored by the complexity of fixed income vs equities. I honestly don't know how people who do it professionally manage.

Does anybody else have an unconventional pastime right now?

Why so few details? Can you share what you’ve learned? Spill it.

What are you buying, and where are you buying it?

I’ve also gotten into active trading. I so badly want to make it a reliable source of income. Sometimes I feel like lately, the market is like a beach wave forming. I need to paddle as hard as I can to catch the wave and ride it to shore, or else the water will swell briefly around me but leave me in the water, replaced by AI.

How far into the journey are you? What style do you focus on? (Day-, swing-, position-trading)?

Thanks for asking. I'm always happy to info-dump about the trading I'm up to. I would also love to hear what you're doing.

I'm focusing on option-selling strategies. Right now that just looks like selling a lot of puts.

I've been learning/trading small for about 3 years, and I significantly increased my account size last summer, so the jury's still out on how successful I'll be. The put-selling is on margin, and for those reading who think that sounds scary, it doesn't necessarily mean I'm borrowing money to trade. But being short puts does mean at any time I can be forced to buy shares of some company, and I definitely do not have the cash to buy all the shares I've potentially obligated myself to buy.

To more directly answer your question, VTI accounts for about 80% of my trading account's net value, and I'm selling puts with the buying power that the VTI position affords me. Other significant positions include:

  • Five short puts on SLV + ~80 shares of SLV (bought with the premium from earlier SLV puts). I'm happy to report I was executing this strategy during the silver bubble's runup and popping last January and wasn't financially ruined.

  • A pretty large position in /MES (micro e-mini S&P 500 futures). This is short puts with a twist. Basically if the market goes up, I make a few hundred bucks. If it goes down 10%, I make a few thousand, but if it goes down 25%, I lose my house (mostly kidding...). If we get another Liberation Day I would have to have somewhere around $20,000 cash on hand to handle the margin requirements to keep this open.

  • Synthetic longs. (Long call financed by a--you guessed it--short put). Right now my most successful one is on Intel. On July 25th of last year I bought a $20 call and sold a $20 put and paid a net of $237 for it. This position is now worth about $7,500. These kinds of positions are always about fantastic strokes of luck, but I never imagined INTC would moon like this.

  • A modest number of short puts on random S&P 500 companies.

Intriguing strat!

I've only just started looking into options. It seems like it will have a lower hit rate but could sometimes be really fun. I might try some leaps, calls and puts at some point. Though these contracts seem like they'll favor inside traders more than anyone. The theta decay looks pretty brutal if you're not pretty spot on with your timing.

When you buy both a long and a put, are you basically betting on increased volatility? Not sure I understand.

I've been learning for 2 years. Ironically my first year was better than my second year. I'm too risk averse if anything.

I'm working on all major aspects of the 'hobby': macro, fundamental analysis, technical analysis and chart studies, the mental part (major focus this year) and also looking at the social/flock/memetics stuff somewhat.

It's definitely worth getting familiar with options. It seems like you already know the basics, and I believe everyone can benefit from understanding their risks and benefits.

The theta decay looks pretty brutal if you're not pretty spot on with your timing.

Yeah, and you can benefit from this by selling those options. Then you have theta decay on your side. Check out tasty trade on Youtube.

When you buy both a long and a put, are you basically betting on increased volatility? Not sure I understand.

Assuming you're referring to my synthetic longs, I'm selling a put and buying a call. It's combining two bullish positions to take advantage of their leverage and different cash flows (one uses cash to open and the other generates cash to open). Buying one call with the money received from selling one put will simulate the risk profile of owning 100 shares of the underlying. You're exposed to all the downside and all the upside.

But, yeah in general having a long put and a long call would need to count on a big move or an increase in volatility to be profitable.

Doesn't this expose you to potentially unlimited downside? If the company were to go tits up after you sold those put contracts, you would be obligated to buy a lot of horrible shares, no?

Ask yourself: if you had the cash you needed to actually buy 100 shares of something you thought was a good hold, would all this worry about exposure to the downside suddenly disappear?

If so, then it’s not the downside risk that you’re worried about; you’ve been through market volatility without panic selling. You’re worried about your cash position. Cash can be managed! Positions can also be managed to minimize chances of assignment. There’s recourse. Worst case, you wake up with 100 shares of some piece of crap and you owe your broker thousands of dollars. You can simply sell the shares to pay back the broker, and you may have to eat whatever loss makes up the shortfall. You just make sure you can handle that loss. And at the end of the month you pay the $4 in tax-deductible margin interest.

So why not use the money you set aside for the risk on even more call options instead? Does selling puts really make your bet more +EV?

More comments

If I understand it correctly, the loss is at least capped at the original value of the 100 shares. Basically, you gain the advantage of owning stock without having to put up the same investment up-front, but you should have at least have a substantial percentage of the money for those 100 shares lying around in some way regardless so that you don't have to take a loan if things go south. But if you do this with multiple investment schemes that are in theory un- or only weakly correlated, then you can use the same stack of money as a guarantee for all of them without ever going negative.

This is basically correct. The maximum loss is the strike price of the put x 100 for one contract. Offset by whatever premium you sold the contract for (which you keep).

Why so few details? Can you share what you’ve learned? Spill it.

  1. I'm hesitant to give anybody the impression that I'm someone they should listen to.
  2. Some of it is geographically sensitive and I don't want to dox myself.
  3. My bar for success is low, so it's nothing particularly impressive. I'm basically using this as a learning opportunity in the hopes that I can have a tier of risk and return that sits between a HYSA and equities.

With that out of the way:

  1. I'm buying bonds directly through my brokerage or at auction.
  2. Bond funds are though my brokerage
  3. Treasuries are through Treasury direct.

What I've found so far:

  1. Municipal bonds are a better deal than their headline yield would imply. Being exempt from both state (if they're issued from my state) and federal taxes gives an increase in the final yield, when you'd normally see a decrease. The default risk is also fairly low. The biggest risk is duration. If your state has a municipal bond fund, you can mitigate that a little through the fund having a rolling portfolio.
  2. Collateralized loan obligations are pretty interesting - I have some money in JAAA and it's doing fairly well. Once again, it beats a HYSA, the duration is low, and it's insulated from some default risk by being last in line to default.
  3. Active bond funds usually do better than passive ones, in contrast to equities. It's enough of a difference that they usually justify the expense ratios.
  4. International bonds are kind of a pain in the ass for taxes, even if they're at arm's length in a fund.
  5. Treasury derived income is usually state tax exempt, which is a nice bonus.

JAAA

See I currently have my spare cash in SGOV which is supposedly super safe, but I don't need it to be that safe. JAAA is a good callout, and I'm curious what resources you're using to explore this part of investing.

what resources you're using to explore this part of investing.

I actually ran into JAAA in an argument on the bogleheads forum, of all places. They're one of the few places left that hasn't gone all in on long degeneracy.

Treasury direct

What's the advantage of Treasury Direct for anything other than IBonds?

If you're willing to manage it yourself you can get a few basis points over a fund.

It's not worth much, but I wanted to know how it worked

Oh you’re into credit markets! I’ve studied this stuff pretty extensively and know a couple of people in high finance (one in particular who works the sell side in DCM and has gotten rich via distressed debt investing); and have a few very distant relatives in IB. The industry has changed quite a bit since the early days of the Internet. Derivatives trading in the classical sense is going the way of the dinosaur. People tell me if you’re looking to really “get into it,” beyond the horizon of an ordinary retail investor, what you really want is a job in “structuring.”

Fixed income (i.e. bonds, credits) are several orders of magnitude larger than equities markets. I’m not exactly going to pitch myself as a person chalk full of solid advice on complex investment strategies (disclaimer: I’m not a financial advisor or professional analyst), but I invest myself, and follow that side of the industry pretty closely. I’ve also been studying the equities of energy markets both international and domestic for the last few years, due to climate change trends and have discovered some pretty interesting things.

I can recommend plenty of resources your way, if you’re into that (1, 2, 3, 4, 5, 6, 7, 8, 9).

Thanks!

People tell me if you’re looking to really “get into it,” beyond the horizon of an ordinary retail investor, what you really want is a job in “structuring.”

Just make sure you're not committing the federal financial crime named "structuring" too. :)

This is structuring meaning making a virtual non deposit taking bank. Where the financing for the virtual bank can have significantly higher credit score than the loans the bank holds as assets.

I've also been investing! I have a blend between individual stock picks, index funds and fixed income. I was originally investing in individual CDs, which are about the same as a HYSA, but I've since diversified to some high-yield bonds and ETFs. Happy to chat more if you want!

What does your process look like when it comes to picking which individual stocks to go for and timing your entries and exits?

Is it just me, or do mortgage backed securities feel like they aren't as radioactive as they were ~20 years ago? The underwriting requirements for mortgages are lot more strict these days, and the systems in place for what happens on a default are more robust.

I've been using a strategy right now of mostly purchasing things that have multiple layers of backstopping. Municipal bonds are another - in my state, if the municipality fails, the state takes it over. If the state fails, at least for the ones I've bought, the feds take over. If the US government fails, I'm not going to be worried about my bond yields. The tax exemption is a nice bonus on those too.

The last couple years I’ve delved more into emerging markets to see what the next hot areas are going to be. Malaysia has recently caught my focus for its developing importance as a digital services hub in that particular region. Kuala Lumpur has also become an attractive destination for some people seeking greater financial freedom and investment opportunities.

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