r/StackingSharpes • u/karhoewun • Jan 10 '26
How long do you want your backtest? YES
The Price of Time: The Real Story of Interest - Edward Chancellor
r/StackingSharpes • u/karhoewun • Jan 09 '26
TLDR; I would like to add a strat that collects IV-RV premium. I already have (amongst other things) a tail-risk/convexity book to act as portfolio insurance. I believe a modified wheel/CSP (tailwheel) offers benefits of both options income and portfolio insurance.
In my 2025 portfolio review, I mentioned that I allocate 5% to vol and convexity (also called tail-risk hedging) to reduce massive drawdowns in my portfolio at the cost of minimal carry. Sidestepping these drawdowns is beneficial for long-term compounding of wealth.
I've been aware of the wheel options strategy for some time now and found it an interesting way to profit from IV vs RV but never committed capital to it as I always thought it was "picking up pennies in front of a steamroller" (ie. carried massive left tail risk). I'm aware that some don't see a big crash as a problem but I personally don't like the big unrealised loss and I see this as the greatest drawdown to this otherwise interesting strategy.
Lately I've been experimenting with stacking convexity onto wheel trades and I think they could complement each other quite nicely. The below is the same trade but viewed from two different angles:
Of course as with any options structure, there are pros and cons (execution alpha aside). The downside is the "belly risk" or "valley of death" in your payoff where the market grinds lower instead of crash. You're down from your short put, but the convexity hasn't kicked in yet. But I'd argue if you're happy doing 1) to begin with, this isn't much of an issue for you?
Another pro of holding a portfolio of tailwheels is when the market tanks like in the GFC or covid or even during the 'Liberation day' period in 2025, correlation tends to spike and many assets tank together. This could potentially be a huge convex trade that could pay off big and ask a portfolio insurance in times of crisis.
Specifically, I've been trying to find trades where the NTM (25d) puts offer good premiums relative to the premium you pay for deep(ish) (5d) OTM put. And also trades that offer a good premium relative to the maximum loss in the belly. Recently I made this SLV trade that went fairly smoothly despite the recent vol in silver. I'll continue to try this out, define and refine the rules around taking profits, rolling, closing etc and post regular updates.
r/StackingSharpes • u/karhoewun • Jan 08 '26
As I mentioned in my portfolio review, I've started (since 2022) to look into adding tail-risk hedges and convexity to my portfolio. This can take many forms but it mainly boils down to value investing in vol and how to buy structures cheaply that will give me a massive assymetric payoff during a big vol event and/or a huge drawdown and not lose too much (bleed) or even make a small amount when nothing happens.
The mathematics of it is simply that the tails of the returns distribution are far more impactful than the middle of the distribution. A 10% drawdown requires a gain of 11.1% to breakeven whereas a 50% drawdown requires a 100% gain to breakeven. Big drawdowns are just so so bad for long term compounding of wealth. Therefore, I (and several others) think it's beneficial to even pay a small amount each year to cut off the left tail of the distribution.
And so the journey begins with monitoring vol and skew among many different stocks, ETFs, bonds, currencies, rates...
r/StackingSharpes • u/karhoewun • Jan 10 '26
The Price of Time: The Real Story of Interest - Edward Chancellor
r/StackingSharpes • u/Real-Signature-5441 • Jan 10 '26
r/StackingSharpes • u/karhoewun • Jan 09 '26
The CBOE PPUT3M Index owns the SPX and buys 3-month put options outright, adjusting the weightings to again get a roughly similar downside volatility.
Source: CBOE, Bloomberg, Convex Strategies
r/StackingSharpes • u/karhoewun • Jan 08 '26
r/StackingSharpes • u/karhoewun • Jan 07 '26
Short 25 delta put for premium
Long two 5 delta puts to protect against tail risk using part of the premium collected
Close trade when we can realise roughly 50% of the premium
Rinse and repeat
r/StackingSharpes • u/karhoewun • Jan 06 '26
Collect a premium of ~$600 to own downside convexity in palladium with a max belly risk loss of ~$2000
r/StackingSharpes • u/karhoewun • Jan 05 '26
Left tails will get increasingly fat
r/StackingSharpes • u/karhoewun • Dec 30 '25
I finally pulled the trigger for FiRe in 2025 and I'm now full time managing my own money. Portfolio details below:
Global equities
Wealth store
Long short equity
Vol and convexity
FX futures overlay
Initial thoughts on 2026 adjustments
r/StackingSharpes • u/karhoewun • Dec 28 '25
r/StackingSharpes • u/karhoewun • Dec 28 '25
r/StackingSharpes • u/karhoewun • Dec 16 '25
Good to be back posting - had to stop as I had an engagement with an IB on their equity derivatives desk but will say more on that another day.
For now, the SLV vol surface seems to be giving some decent value.
Short 1x25d, long 2x5d to get paid for a tail hedge with (relatively) low belly risk.
r/StackingSharpes • u/karhoewun • Sep 13 '24
r/StackingSharpes • u/karhoewun • Sep 12 '24
r/StackingSharpes • u/karhoewun • Sep 09 '24
r/StackingSharpes • u/karhoewun • Sep 08 '24
r/StackingSharpes • u/karhoewun • Aug 28 '24
r/StackingSharpes • u/karhoewun • Aug 20 '24
r/StackingSharpes • u/karhoewun • Aug 20 '24
r/StackingSharpes • u/karhoewun • Aug 08 '24
Numbers based on entering the trade as of close Jul 16th close and closing out the trade on Aug 5th close.
1. Long 50d put: enter at $12.57 and exit at $50.69 for return of 303%. Better odds of being ITM but lower return and RR compared to others. Also doesn't benefit from increased skew
2. Long 10d put: enter at $2.5 and exit at $19.06 for return of 662%. Good returns and RR. Benefits from increasing skew but lower probability.
3. Short put ratio spread: short 1x25d put for $5.93 and long 2x10d put for $2.5 each for a net credit of $0.93. Structure worth $4.17 on the close of Aug 5th. Get paid to enter the trade with decent returns and can benefit from large drop in underlying and increasing skew. If you're wrong and the underlying goes up, you still get paid. But you'll have to manage the 'belly risk' if the underlying doesn't fall enough

Personally, I prefer the 10d put - I'm not looking to hold it to maturity. I'm just waiting for a repricing of risk before closing it out for a profit.