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The Trade Busters
38 - Trinity System, Part 2: The Bomb Shelter
Oct 23, 2021
This episode discusses the results and performance of the 'bomb shelter' in the Trinity trading system, including backtesting and live trading. It analyzes the impact of the bomb shelter strategy on short options and longs, evaluates its effectiveness in reducing drawdowns and increasing returns, and introduces the concept of the vibranium shield as a solution for sell-offs. The chapter also explores a longitudinal study of the Trinity system results, emphasizing risk management and the positive performance of the income strategy.
30:13
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Quick takeaways
- The bomb shelter in the Trinity system is designed to act as a hedge for severe Black Swan events, providing protection against significant market gaps.
- The bomb shelter strategy, while adding to returns in certain years, may result in decay of long options and overall net P&L drag, requiring leverage to maintain profits.
Deep dives
Overview of the Trinity System and the Bomb Shelter
The podcast episode provides an update on part two of the Trinity system, specifically focusing on the bomb shelter. The bomb shelter is designed as a hedge for a severe Black Swan nuclear bomb type of event, where there is a significant gap down of 20% with no chance for a trading range in between. The speaker discusses the back testing that has been done, both through manual back testing and live trading results. The bomb shelter is considered to be an optional add-on for the Trinity system, and the speaker emphasizes the importance of deciding if it is something worth pursuing based on personal risk tolerance and belief in the need for such a hedge.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode