Parrilla and Pal — A Macro Masterclass in Portfolio Construction and Management

Published on
August 6th, 2020
Duration
83 minutes


Parrilla and Pal — A Macro Masterclass in Portfolio Construction and Management

The Interview ·
Featuring Diego Parrilla

Published on: August 6th, 2020 • Duration: 83 minutes

Diego Parrilla, portfolio manager and author of "The Anti-Bubbles" and "The Energy World," returns to discuss his poignant predictions that are coming to fruition one-by-one in this conversation with Real Vision CEO and co-founder, Raoul Pal. As well, Parrilla gives a master class on how he has developed his own macro framework and the subsequent portfolio construction and management that has served him extremely well both before and after the March crash. After establishing his current outlook, Parrilla focuses on the 5% of his portfolio dedicated to finding outsized returns using options and what he calls the goalkeepers of your portfolio. Filmed on August 3, 2020.

Comments

Transcript

  • SM
    Sascha M.
    27 August 2020 @ 14:10
    Thanks Raol and Diego for this deep inside !
  • KM
    Kamal M.
    21 August 2020 @ 20:23
    one of best interviews by RP, both Diego (thanks for generously sharing very good way of looking at the new world) who spoke candidly with credibility of a someone who has done it and RP who kept the conversation flowing asking right questions which only someone who has run risk can know to do.
  • LP
    Lauri P.
    7 August 2020 @ 20:45
    Excellent video! I have been trying to implement a small "defender" part on my portfolio and Parrillas (and Chris Cole) approach on the topic has been great inspiration. After a year of trial and error + countless hours doing research & digging into the intricacies, it's pretty obvious managing such portfolio is really a full time job. Very frustrating there are no funds available to retail investors such as myself. Considering the accreditation rules and such are probably not going to change any time soon, I would really appreciate content that is aimed for building & managing a low maintenance defensive option strategy. Some of the rv+ content (and this video!) recently has been slightly to that direction which I appreciate, but unfortunately still somewhat impractical. After watching this one, I'm thinking the simplistic approach of long btc + gold, some rotating hedges on gold and currency/commodity option hedges might be able to capture good chunk of the benefits.
    • KD
      Kurt D.
      10 August 2020 @ 00:00
      Jason Buck's fund has $100k min allocation and they handle it all for you...
    • JO
      Jayden O.
      19 August 2020 @ 06:53
      Kurt, do you know how much they charge for that?
  • DS
    David S.
    18 August 2020 @ 19:43
    Thank you, Mr. Parrilla and Mr. Pal. This is the most important investment interview for me in the history of RVTV. I am very risk averse. Thanks to Mr. Parrilla I finally understood that total risk including counterparty risk are defined in the call option purchase price. I can handled know risk much better than unknown risk. I placed to long-term call options yesterday. Thanks again. DLS
  • LQ
    Leslie Q.
    17 August 2020 @ 09:30
    What a great interview there, the breakdown in options and how he dissects his portfolio in as best a format for us to listen is a real pleasure. Looking forward to more interviews with Diego in the future :)
  • CB
    Cliff B.
    16 August 2020 @ 12:53
    👍 Great interview, loved the picture in the background, where can I get a copy.
  • JS
    Jon S.
    6 August 2020 @ 11:09
    I love this interview and as Spanish I love to see that one Spanish is able to make such great statements! Gracias Sr. Parrilla. Cordiales saludos.
    • JS
      Jon S.
      13 August 2020 @ 02:21
      I look for his book but in the „amazon reviews“ they say that the grammar and syntax is not so good. Does anyone know if he has the book „antibibubbles“ in Spanish?
  • GR
    George R.
    12 August 2020 @ 12:22
    Amazing. I literally stopped the video midway to write this comment. The breakdown on the options is one of the most informative I have come across. He explains his thought process so eloquently with a tons of of enthusiasm that you stay engaged the entire time. Definitely a video that I will continue to rewatch and also view his other interviews in Real Vision. Good stuff!
  • FR
    FLAVIO R.
    12 August 2020 @ 03:29
    Taking notes indeed ha "Buy Puts on Bubbles and Buy Calls on Anti Bubbles" Proper Interview!
  • JT
    Joseph T.
    11 August 2020 @ 19:45
    Outstanding interview.
  • SB
    Stewart B.
    11 August 2020 @ 14:11
    One of the best interviews. Particularly interested in the joint probability trades.
  • RD
    REMCO D.
    9 August 2020 @ 19:48
    The parts I understood were impressive. The parts that I didn't probably were too. I wish there were less of the latter. How do I learn this stuff?
    • KD
      Kurt D.
      9 August 2020 @ 23:56
      Keep absorbing, studying & engaging Remco! Seek and you shall find.
    • RD
      REMCO D.
      11 August 2020 @ 09:40
      I'll try @Kurt D!
  • jW
    john W.
    11 August 2020 @ 09:10
    Yes Raoul, notes, notes notes! Excellent interview. One of the best.
  • RB
    Robert B.
    11 August 2020 @ 04:20
    Diego, do you have any funds available to US based investors? The prospectus found on the Quadriga website states that the fund cannot accept US investors. Thanks!
  • CN
    Christopher N.
    10 August 2020 @ 22:21
    Excellent and entertaining video. Soooo much to chew on! Thank you!
  • ao
    andreas o.
    10 August 2020 @ 21:40
    Great Interview. Thank you!
  • SH
    Si H.
    10 August 2020 @ 21:04
    Gold 3000$-5000$
  • PR
    Peter R.
    10 August 2020 @ 19:42
    wow...a master articulator!
  • BI
    Brett I.
    10 August 2020 @ 17:37
    One of the best and most interesting videos I’ve watched. Diego was brilliant and football analogies really helped put it in context.
  • MB
    Manish B.
    7 August 2020 @ 05:04
    Fantastic interview. For months, I've been flirting with the idea of a portfolio constructed entirely from LT options to capture both tails, i.e. NO delta-1 instruments. I've made significant progress and Diego's commentary, while not encouraging such a method, provided helpful perspective.
    • MT
      Mike T.
      7 August 2020 @ 13:24
      .... a portfolio constructed entirely from (buying/debit positions??) Long term options. If you're going to try it remember mathematical probabilities of how Options are priced and work means the odds are not in your favour but hey you may have found some secret source. Suggest test your strategy with real money using smallest possible positions over the same period of time that you class as long term. One other thought I'd like to leave you with consider the folks on the other side of your long term debit positions i.e. the market makers are do you think it likely that over the long term they consistently provide option buyers a free ride and an easy path to regular profits.
    • MB
      Manish B.
      7 August 2020 @ 13:46
      Hey Mike T - I should have expounded in my original comment, but not debit spreads or long straddles, at least not regularly or else it's too much bleed. More like even money OTM Put Ratio Spreads + OTM Call Backspreads. Both these positions reap benefits of skew and are placed opportunistically. I'm willing to be assigned on my net short puts.
    • MT
      Mike T.
      7 August 2020 @ 14:15
      Manish i really like your comment "willing to be assigned" on your short puts. Apart from the mathmatically higher probability of profit when using short (selling options) premium strategies over debit (buying) strategies one of the real value adds of short premium is the ability to adjust & manage in return receiving more USD credits, the greatest management flexiblity of all is available for naked short options. Knowing in advance that you've sized your positions appropriately, carefully chosen underlyings relative to the amount of trading capital available allows one to not being scared or worried of being either assigned or scared or threatened by 'marked losses' is a key management component. When the short premium option trader starts to see 'marked losses' in open positions the key is not to panic but rather if one has sufficient capital - broker will increase buying power requirements - await the high probability that Volatility (option prices) will compress and revert to the mean. Even back in March my own existing short premium positions certainly got the heart rate up, however they did not all end up large 'realized' losers, it was possible to get most to be either small losers or flat which at the time of VIX > 80 I thought a reasonable end result, certainly not life threatening. I got back into establishing new short premium positions in early april with vix at approx mid 50's. Last thing, best of luck, but which ever way you go, test your strategies first with small positions and real money.
    • KD
      Kurt D.
      10 August 2020 @ 00:13
      Great thread here! Mike T, if you get this, I'd love to chat with you. My trading partner and I would love to swap ideas. We've built an exhaustive list around long vol principals and trade structures. @KurtyD
    • MT
      Mike T.
      10 August 2020 @ 11:08
      @ Kurt D. I'm happy to talk but read and consider the following first, and if you want to go ahead ask the folks at RV for my contact details FYI I'm + 5 hours ahead of EST. Firstly I'm a total 'nobody' with zero public or online profile, nothing to sell, nothing to promote, no personal or family relationships with any company or people in the industry. To be sure you really want to speak with me, here's an outline of my approach. You say you've built an 'exhaustive list around long vol principles' and trade structures? I'm hoping you've interpreted my comments correctly in that I run my personal portfolio on Short Vol principles i.e. I sell Option premium, carrying +'ve Theta, Negative Vega and importantly nearly always carrying **short** -'ve Delta (yes small but still directionally short even during the last few weeks with the Market ramping ever higher) the complete opposite of yourself. The only exceptions being I will occasionally establish short term trades (2-3 day, 5 at an absolute max) using VXX or UVXY but only when VIX futures are in backwardation, and sometimes SVXY but only when VIX futures are in Contango again typically for 2-3 days only. Basically I'm playing on two things. 1./ statistical fact, Volatility spikes are seen in short clusters of time AND then reverts to the mean, the last few weeks being a perfect example. Yes I got hurt earlier in the year, but I was able to limit the damage (more below) with a plan of what to do. 2./ The passing of time, Theta decay really starts to decay option prices at an ever faster rate 45 DTE remember Short Premium position Sell to Open for a $$ Credit, statistically volatility tends to compress, hence close out by buying back position for price lower than initially sold for a profit Please note I have never been persuaded of the *VALUE FOR MONEY* repeat, *VALUE FOR MONEY* of long term, long volatility positions. I consider my primary defence against a sharp increase in Option premiums, e.g. VIX up being always KEEP POSITION SIZE SMALL relative to the amount of available Capital appreciating Options are leveraged instruments my average comfort zone for % Capital deployed (% buying power used) is 30%, when VIX spikes higher I grit my teeth and deploy more capital but never more than 50% round number. Such percentages would be totally inadequate for a purely Stock only portfolio. I'm a keen advocate of education, and testing one's strategies with small amounts of real money over a long period of time, and completing a large number of trades e.g. round numbers 3000. It took me roughly 2 years to get through firstly the theoretical brain dump followed by completing sufficient number of trades so that I might be able to have confidence backed by my own statistical evidence. I will only establish positions in the underlyings with most highly liquid Options AND only in underlyings so priced that even when an open short premium option position shows a 'marked loss' ( and most will at some point) I'm not stressing on how to manage e.g. roll puts up, roll calls down, roll out in time etc or worring about getting assigned e.g. a 10 lot strangle in AMZN is not a go to trade for me. Multiple positions in much lower priced underlyings but still highly liquid is more attactive for me Other keep points of my approach: I closely watch the following Portofolio metrics 1./ ratio of +'ve Theta/ -'ve Delta, different values for different VIX ranges 2./ I have a Max level of Portfolio +ve Theta 3./ I have max level of Portfolio Extrinsic Value, once more different value for different levels of VIX range. 4./ During periods of really high volatility I watch how my Broker is increasing buying power requirements on open positions like a hawk e.g. if you don't do this during such periods, if overall one deploys too much Capital, the Broker can completly screw up the best laid plans and close out positions completely invaldating one intention of how to adjust and manage. KEEP SIZE SMALL, STICK TO MAXIMUM % VALUE of available Capital deployed, never get too big. 5./ Beta weighted to the SPY, portfolio Delta e.g. if SPY moves +/- 'X' dollars on anyone day I have a pretty good read on how much my Portfolio will move in $$ terms I prefer if Capital constraints permit to use Naked Short Option positions if possible, not simply being attracted by theoretical enchanced profit potential, BUT mainly because Naked Short option stratgegies have the most flexiblity to adjust, manage & correct and stay in the trade longer, particularly import when VIX spikes higher. The moment one places protective long wings to a position, there will be much fewer opportunities to adjust. a few couple of other points: * the Short Premium Option trader is most at Risk during the last 21 days prior DTE i.e. enhanced Gamma Risk. A very simple way to avoid high levels of Gamma risk is approx 3 weeks prior DTE roll the postion out in time to next monthly cycle. * I only ever use monthly cycles. * Theoretical Sweet spot for new short premium (short volatility) positions is 45 days prior DTE, then at 21 days prior DTE either close or roll out in time to next cycle. * Percentage profit targets at which point close out, at 50% max profit, subject to adjustment if positions starts to work very quickly e.g. 10% in a day, thankyou very much I'll take it. Last comment, for which I may get serious push back, but hey this forum is for debate and differing views by those selling or believing in Long Vol Option Strategies. In statistically terms the $$ BPR (buying power reduction) is of sufficient size to cater for over 98.5% for worst case secenarios. I'm not saying Long Vol can't work, it can, just not frequently enough to be 'value for money' Such folks will home in on the unlimited risk potential of naked short premium Option strategies, citing many of the much published disaster stories, in every case of disaster I believe the root cause was probably getting too big too greedy and getting too big without having completed the hards yards of educating and testing ones plan with small positions and small amout of real capital before going into the market with sizeable postions e.g. two years work for me .
  • VT
    Vincent T.
    10 August 2020 @ 07:14
    Put Diego with Ed, and let's talk football!
  • JV
    Joel V.
    10 August 2020 @ 06:00
    First RV video I have taken notes on. brilliant. lots of great quotes, including describing the the shift "from risk free interest to interest free risk". really informative, engaging, and challenging (I need to learn more about options!). thanks Diego.
  • PM
    Paul M.
    10 August 2020 @ 02:36
    This works. It is very interesting as I am running my own small personal options portfolio based on very similar principles and structure. Year-to-date, I have been able to generate returns of 1600%. What he is talking about is pretty much exactly what I have been doing, however I don't do the 30-year treasury and TIP thing, and I don't do cross-currency. I keep it to even fewer assets: just precious metals, cash, and the Russell 2000 as a hedge. Mainly options. I don't think my options technology understanding is as advanced as his. Having said that, I may be bringing in other investing dimensions into play: market psychology, focus/importance on catching the first big run-up in various areas of precious metals relative to gold, the technical analysis work of Michael Oliver at MSA has been tremendous and probably the most useful, TF Metals Report and Eric Sprott have also helped a ton, Real Vision too! I spend all week trading/tinkering/often just keeping myself from doing to much of anything big, then after caching up on the week's information/various views of others on Saturday (this video being a good example), I take a long walk and digest everything including all those sources/dimensions noted above. Often I feel I can find a market nook or angle to materially shift options positions on Monday morning and for the rest of the coming week(s) so as to keep almost all the upside optionality in the portfolio while reducing portfolio risk by 10 to 30%. Not every Sunday/week, but quite often. I feel like I have been able to find the right relatively mispriced options or some of the most mispriced options in the precious metals arena - I then I add that to the portfolio in a major shift and eliminate the least efficient option. I guess instead of having 25% of my money in 30-year treasuries/TIPS, I just keep about that amount in cash. (Note that in any case TIPS have been highly correlated to gold for at least the last 6 weeks or so). Cash allocation has been a good discipline as the portfolio grows because it forces me to constantly sell less efficient options positions and continue to search for more efficient options so as to keep the upside potential (while increasing the cash position). Real Vision has had Michael Oliver but needs to interview Eric Sprott: the biggest billionaire silver bull on planet Earth.
    • P
      Paul .
      10 August 2020 @ 04:08
      I should note that Eric Sprott is doing with junior silver miners exactly what John Templeton did in WWII. Templeton reasoned that WWII would finally bring the US out of the Depression, and sprayed all his savings across the stock exchange equally weighted in stocks worth less than $1 a share (ie. the quasi bankrupt ones down probably 95% from their highs but still surviving somehow). What Sprott has been doing is similar, he has been buying junior miners, especially junior silver miners using his years of experience and looking for those with the most leverage to silver. This last week, however, he reached Templeton levels and just started buying literally any small stock with silver in the name! Those are massive perpertual options on silver which itself, at this stage of the game, is a huge option on gold.
  • JL
    John L.
    10 August 2020 @ 00:19
    That was an amazing interview. Well done, guys! Between re-watching and studying this, as well as reading the copy of Diego's "Anti-Bubbles" book that I just bought, I know what I'll be thinking about for the rest of August. Very solid stuff.
  • DH
    Dominick H.
    10 August 2020 @ 00:17
    Simply awesome! will have to watch it several times to understand his strategy and tactical approach. His book was published in 2017. is there an online update on 'what next'?
  • TE
    Thomas E.
    9 August 2020 @ 18:00
    Fantastic interview
  • DS
    David S.
    6 August 2020 @ 20:44
    Brilliant interview Mr. Pal. Each time I listen to Mr. Parrilla and Mr. Lacalle on RVTV, I learn a lot. My first trade in 1972 was an option. I figured the option would go up if three things happened. The three things happened. The option expired before the stock went up 50%. Timing is everything. It was expensive at that time to buy stocks and options. From that time, I looked at stocks as options without an expiration date. The downside risk is the same, zero. I just have too many things to do before kicking the bucket to carve out time to learn to properly trade options. With a stock list in hand, I wait in cash, gold and silver for large market downturns. It does not take as much time out of my day. DLS
    • JC
      Jason C.
      7 August 2020 @ 08:38
      Same, except my first trade was this year. -20% puts on spx expired 3 weeks before the bottom. I only know enough about options to know that I'll blow up if I try selling them.
    • MT
      Mike T.
      7 August 2020 @ 15:53
      Nice post DLS. The downside to only using actual stock rather then their Options (but only if highly liquid) is using the derivative is a much more efficient way to deploy capital buying and selling stocks outright is highly capital inefficient.
    • DS
      David S.
      8 August 2020 @ 19:07
      Mike T - You are correct. DLS
    • GH
      Gloria H.
      9 August 2020 @ 15:10
      Oh dear. Trying to learn how to trade options and this is scaring me away. :-) Actually, the more I read and listen to, the more attuned I become to the inherent risks (like any other endeavor). Thanks for sharing your cautionary tale.
  • Sv
    Sid v.
    9 August 2020 @ 14:40
    Excellent. He's right of course, but the issue is how do i do this in a small way.
  • AR
    Abishek R.
    9 August 2020 @ 12:38
    This is education.
  • MK
    Munira K.
    9 August 2020 @ 08:16
    Diego provides a thought-framework which is uniquely insightful. Excellent! Thanks so much
  • PC
    Peter C.
    9 August 2020 @ 05:43
    This vid demonstrated Diego's impressive understanding of what has, is, & likely to happen in the macro global world. Raoul did an excellent job of not speaking to much, lol. Allowing Diego to really fully flush out his thoughts, however, asking the right questions at the right time to move things forward and give us a full understanding of Diego's thinking & strategies. I love Diego's ability to step out of paradigm's like if we have inflation then we will have rising interest rates. In fact, he is embracing and betting we will have inflation and low interest rates hence gold and 30 year Treasuries. and btw that is the only way governments can deal with the massive debt levels they've created. Kudos to Diego & Raoul.
  • sc
    steve c.
    6 August 2020 @ 10:01
    I actually find it kind of scary that Diego, despite his vast experience is clearly discounting Crypto altogether. This, in my humble opinion, shows the lack of openness and willingness to change that many 'traditional' guys have. When you look at where the markets and the economy are currently, you would surely be a solid mix of Gold/Silver and Bitcoin/Ethereum and maybe 25% opportunity cash for the reasons Raoul has explained previously. The old methods of portfolio building are completely outdated and sadly many people are going to lose a lot of money due to imbalances in their portfolio. The world has moved on and most hedge fund managers and portfolio managers are about to catch a cold for their clients and ultimately their businesses. Very sad...
    • AT
      Anthony T.
      6 August 2020 @ 12:54
      I used to be full on BTC+ETH. I added Gold and Silver only after coming to Real Vision. Anyway, both plays have been doing well. Gold and Silver is less volatile, easier to sleep at night lol
    • LK
      Lauri K.
      6 August 2020 @ 17:20
      I have no problems sleeping with my bitcoin holdings, because in my opinion it is the safest way to store value in the world. The valuation in dollar terms is not relevant in a longer term view. Obviously if your lively hood depends on the performance, the situation is entirely different.
    • DT
      David T.
      6 August 2020 @ 18:52
      Crypto is too volatile and unpredictable from market and from technical views. Can have huge drops, like risetly and then high ups. Hedge fund managers that manage other people's money cannot justify crypto yet for their portfolios. Crypto is not a currency yet and not fully store of value. Crypto coin can just disappear one day. It doesn't really exists. Would you sell your house for any coin today?
    • rc
      ritesh c.
      6 August 2020 @ 20:42
      IMO It may be due to the rules given to him by his investors. Some investors just don't understand block-chain and don't want their capital exposed to it.
    • RT
      Rex T.
      7 August 2020 @ 07:51
      Quantum computing will destroy most cryptography. By the time BTC holders figure out ways to stop hackers using quantum computing, hackers will have stolen all the crypto you have. 10 years time. Coming soon. Own Gold and Silver.
    • JC
      Jason C.
      7 August 2020 @ 08:58
      Quantum computing issue is overrated. Some coins are already implementing quantum resistant cryptography. Besides bitcoin will reach 1 million before quantum computing is advanced enough break cryptography. Whenever someone's job relies on you being convinced that their tech is on the verge of revolutionizing so and so field/industry, you should double or triple their ETA at a minimum. Besides, hackers won't use quantum to steal all your crypto - they'd find that your crypto is suddenly not worth very much. The threat to crypto is governments who see their sovereignty over money being threatened and therefore see crypto as an issue of national security. Buy bitcoin, but if you have enough capital to preserve then buy gold too.
    • PC
      Peter C.
      9 August 2020 @ 04:54
      Steve, you need to watch this again ... Diego's portfolio is far from "old methods of portfolio building are completely outdated and sadly many people are going to lose a lot of money due to imbalances in their portfolio". Diego is no where near your 60 40 portfolio. Diego's YTD return is +60% with 5 sortino ratio.
  • PH
    Pompeu H.
    8 August 2020 @ 22:13
    Amazing. Simple as that.
  • MH
    Michael H.
    8 August 2020 @ 21:44
    Wow! One of the best interviews in RV. I have to watch a few times to fully absorb everything that Diego is saying but all good stuff. Thank you Diego, thank you, RV
  • AH
    Allan H.
    8 August 2020 @ 20:53
    Excellent thx gents. Good to hear TIPS included in portfolio, RV would be great to have a session on TIPS.
  • jg
    john g.
    8 August 2020 @ 18:03
    First of all, Diego is a gentleman, which I personally appreciate. I struggle not so much with the thesis as with the execution. I agree that when the s&p was at 3400 in February, option protection for a black swan event was inexpensive. Not today. Building a defender’s position is expensive! I need to think more about this, and about synthetic hedges (we used these for FX forward contracts at ABN and JPMorgan) but what if your risk mitigating correlations are wrong?
  • TS
    Theodoros S.
    8 August 2020 @ 17:54
    There is one certainty this guys loves going long options.
  • TS
    Theodoros S.
    8 August 2020 @ 17:54
    There is one certainty this guys loves going long options.
  • DB
    Donna B.
    8 August 2020 @ 17:53
    Last month I watched Diego Parrilla for hour interview on another (free) platform/podcast. It was not the deep dive as this one on RV. Here Diego explained his strategy in detail. Well done interview.
  • RM
    R M.
    8 August 2020 @ 15:13
    All: Search RV for Diego’s pieces on oil. They are equally fascinating and hugely thought provoking. Diego: For goodness sake, launch your own actively managed etf, ala Ark funds in the usa. Your ideas are brilliant, but as noted in the comments, way to difficult for smaller investors to replicate (and I have gotten some real jewels from listening to this twice). Really appreciate your videos on RV. Thanks.
  • RY
    Roy Y.
    8 August 2020 @ 12:12
    Superb
  • MD
    Matt D.
    7 August 2020 @ 05:32
    Great interview Raoul and Diego. Loved it. Some brilliant insights. I wonder if binary options have a role in some of the trades discussed. I believe they could. Technically not long long, but the sold options have an automatic limit at zero. The returns are capped too - but they have a niche in binary like "bets". Regardless, the psychology is the same as the long only option strategy and superior in my opinion. I now have a good excuse for watching more soccer/football - trading tactics research. Thanks - really enjoyed this. Great guest Raoul.
    • PJ
      Patrick J.
      7 August 2020 @ 10:58
      Binary / digitals / knockins or outs, are just expensive repackaged vanilla vol. So to answer your question probably not.
    • MD
      Matt D.
      7 August 2020 @ 17:55
      Thanks Patrick - I disagree about the vanilla vol. Totally different conceptually. Anyway.
    • MD
      Matt D.
      7 August 2020 @ 23:08
      A bit more detail - binaries can be profitable in any vol environment; vol only brings the prob. closer to 50%. Another positive is that you can capture theta with no open-ended risk.
    • MD
      Matt D.
      8 August 2020 @ 07:30
      Thumbs down fine - but I'm speaking from experience (real money) and my can easily debate this for as long as it takes. For one, if what you're saying is true, then it would be true for all options.
  • RG
    Rob G.
    8 August 2020 @ 05:20
    got a tonne from that Diego & Raoul...great interview thanks.
  • RD
    Ryan D.
    6 August 2020 @ 11:57
    I’d love to see a panel or a debate with Jim Rickards or similar deflationist. The M2 velocity has fallen off a cliff- how does this integrate with the inflation thesis.
    • AB
      Alastair B.
      6 August 2020 @ 17:04
      Deflation until vaccine, inflation after - when everyone goes out and spends like normal again
    • FC
      Frederick C.
      7 August 2020 @ 06:35
      or once election is over and there a massive deficit financed green new deal plus repatriation of key production to ALENA from China, velocity will turn up combined with massive M2 balance
    • WM
      Will M.
      8 August 2020 @ 02:38
      Sorry Keith, I don’t see things returning to normal. The world has changed and the Sovereign debt crisis rapidly approaching will destroy the system as it is today. Once “the point of recognition” is reached financial chaos is all but guaranteed as the public understand the paper in their wallet is losing value rapidly. There is no escape from a credit driven long wave cycle peak. History has not changed. There is nothing new under the investment sun....
  • FC
    Frederick C.
    7 August 2020 @ 06:37
    so 50% gold, 25% UST, 5% options (puts & calls), what is the last 20%, did I miss something?
    • JL
      J L.
      7 August 2020 @ 08:02
      From what I understand 20% is further options with expiries in coming years, 5% is the maximum loss from option decay in 2020
    • DR
      David R.
      7 August 2020 @ 09:54
      Really hate that UST allocation tho. No thanks. Talk about huge risk for little reward with dubious diversification benefits anymore. Anyone who understands the math and complexities of real and implied volatility of securities analysis can see the potential collapse awaiting UST. I worry about UST blowing up way more than equities blowing up. Many UST holders risk losing most of their capital. Not to mention, UST is denominated in one of the worst currencies on earth too, destined for a historic crash as well sometime like I've been warning since even before its recent collapse of 1000+ pips.
    • DP
      Diego P. | Contributor
      7 August 2020 @ 21:39
      It’s actually 50/25/25. But the 25 in options is split over time with approx 5% per annum. My long option portfolio goes our 30 years.
  • MS
    Martin S.
    7 August 2020 @ 20:31
    Fantastic video really enjoy Diego’s deep dives, done great episode on Grant’s TTMYGH on his bubble thesis also well worth a watch too.
  • PE
    Paul E.
    7 August 2020 @ 15:53
    GREAT!
  • SS
    Stephen S.
    7 August 2020 @ 15:49
    I’m certain Diego is a very sharp man, however it’s a little too technical for me to follow. I’m not a pro.
  • DY
    Dmitry Y.
    6 August 2020 @ 22:03
    I like Diego's framework and thesis, but I disagree with one thing that inflation is 100% monetary phenomenon, don't think it is 100% true. I tend to agree with Hugh Hendry and Russell Napier that it is fiscal phenomenon.
    • AM
      Alonso M.
      7 August 2020 @ 14:34
      Uncle Sam is now holding hands with the Federal Reserve in a campfire Kumbaya moment and turbocharging the monetary phenomenon that is supposed to be Fed's bailiwick. It can be easily argued that Uncle Sam's recent bailouts are a monetary phenomenon disguised as a fiscal phenomenon. This is probably why gold has taken off like a scalded cat.
  • JM
    Jackson M.
    6 August 2020 @ 23:38
    Awesome interview! As someone who really just understands options basics, I am intrigued to learn more and how I can implement some of it into my portfolio. Does anyone have some recommendations on how to learn? books, websites, videos etc. Thanks!
    • MC
      Michael C.
      7 August 2020 @ 04:51
      Unless you are a HNW/UHNW sophisticated investor with experience in options and a lot of knowledge and you have great modelling systems you wont be able to implement these strategies properly. Reading through these comments its very clear that most RV members are inexperienced retail investors who do not have access to the right resources to do this kind of stuff properly. Diego actually revealed very little about his strategy. If you are an UHNW this conversation is aimed at you so you can contact him and allocate some of your capital to his fund. Why do it yourself if you can pay him to do it for you more efficiently. I'm sure he is very good at it. But to think retail investors can do this without screwing up is ridiculous. RV should be careful about how it promotes options trading. I started my career 20 years ago on a derivatives desk and spent many years managing an options book, including through 2008/2009. I have seen people make and lose fortunes and I know some who took their own lives. The best of times and utter tragedy. Most people blow up after a while. There should be a huge warning at the beginning of these videos about the dangers of options.
    • MD
      Matt D.
      7 August 2020 @ 05:44
      Fair point. Long only would be less of a drama ? Still can get wiped out eventually. Accessing the right options I agree is the important how to question.
    • DT
      David T.
      7 August 2020 @ 08:50
      This not for retail investors. This is where RV is not clear about which market it is directed, private individual investors or more institutional investors. Especially looking at the subscription fees.
    • MT
      Mike T.
      7 August 2020 @ 09:13
      @ Michael C . excellent post. I'm in agreement with almost everything you have said here, with one small push back. Instead of *huge warning* about the *dangers* of Options which can scare people and deter many from even trying I prefer another approach saying folks must educate themselves first and with a very broad brush this takes approx 2 years of daily effort to achieve an average level of knowledge. I would also suggest it takes 3 months of full daily immersion just to achieve an elementary understanding of the opportunities and coming up with a plan of action that to be worked on for 2 years. The plan of action should include not only a theoretical knowledge brain dump but also actual testing chosen strategies by placing live trades in highly liquid Options using real money, BUT the positions must be very, very...... very small i.e. basically deciding in advance how much money one is prepared to lose in their own education process. One of the real challenges in getting educated is anything worth while usually comes with $$ cost implications. In my view there is just one and only one Options content creator that is not just of excellent quality but is entirely free to view and they answer emails, take calls etc all without taking a penny. I wont plug them by name but a few minutes searching they are very easy to find and an excellent place to start.
    • DR
      David R.
      7 August 2020 @ 12:45
      Michael and Mike. Both excellent posts. Options are high risk. But that shouldn't put one off. The key is proper position sizing and risk management, as always. Too many novice and amateur traders make risk mgmt an afterthought, usually when they've already blown out their account. The school of hard knocks. Been there, done that, about 50 years ago. When I was young and cocky, especially after some big high-risk trades went my way (just luck in retrospect), only to lose most of in a bad trade later. Fully deserved in retrospect. Easy come, easy go, etc.
    • MT
      Mike T.
      7 August 2020 @ 14:28
      @ David R, thanks for your post. I've always found the term High Risk interesting in mostly people will say High Risk of losing, which is far enough, but High Risk should also be applied when considering the very small success rate, sometimes still losing even if directionally correct at time of position entry if regularly using Option buying/debit strategies.
  • KC
    K C.
    7 August 2020 @ 06:16
    can someone explain the discussion on dollar/yen? the bit where they discuss dollar/yen is bad money disguided as good money, what does that mean?
    • MC
      Michael C.
      7 August 2020 @ 07:27
      Raoul should discuss it. He brought it up.
    • JL
      J L.
      7 August 2020 @ 08:06
      do they mean the yen is a fake safe heaven?
    • MT
      Mike T.
      7 August 2020 @ 10:32
      J.L. the YEN is not a safe haven there's a valid argument to suggest it's the worse of all the fiats. It's place in overall market structure is as a 'funding currency'. Do a search of this term to learn more
  • WL
    Wayne L.
    7 August 2020 @ 08:26
    This was *really* good. Thankyou Raoul and Diego.
  • SS
    Shanthi S.
    7 August 2020 @ 08:11
    Aaaahh!! So good!! Thank you both so much!! Incredible wisdom from both of you.
  • MH
    Madhushanka H.
    7 August 2020 @ 07:19
    Its an understatement by Raoul to say Bitcoin is an option. Its a super option with zero theta decay :)
  • MW
    McChicken W.
    7 August 2020 @ 05:35
    Great interview, really like the way Mr Parilla thinks and acts, so much that I've started to check out his investment funds.
  • MM
    MARTIN M.
    7 August 2020 @ 04:11
    Absolutely Excellent!!
  • MP
    Michael P.
    7 August 2020 @ 03:06
    Beautiful Minds
  • AC
    Andrew C.
    7 August 2020 @ 02:56
    Brilliant interview. Bravo
  • MC
    Michael C.
    7 August 2020 @ 01:55
    1 hr 20 min of listening to Diego pitch his fund to us. 🤦‍♂️
  • LB
    Lorenzo B.
    6 August 2020 @ 16:24
    WHo in the world sells a 30y-expiry option?
    • JS
      John S.
      6 August 2020 @ 21:33
      Someone who will one day get carried out on a stretcher
    • KB
      Kyle B.
      7 August 2020 @ 00:15
      Maybe a 30 Yr bond issuance/portfolio?
  • jt
    john t.
    6 August 2020 @ 20:31
    any Americans don't under soccer analogies holla at me
    • TB
      Tobin B.
      6 August 2020 @ 23:16
      Strikers are wide receivers Midfield are Tightends and runningbacks Goalkeepers are the offensive linemen
  • DT
    David T.
    6 August 2020 @ 19:09
    One suggestion for RV team would be to have some graphs and charts for better understanding of the trading strategies. I know it’s a live interview and cannot always plug in charts but, may be during editing. Would increase the value of the video.
    • CD
      Christopher D.
      6 August 2020 @ 22:59
      On the flip side, a bit of a hassle, but when I pause the video and go check by myself, I pause and I learn by doing. It commits better to memory and gives you time to reflect and perhaps decide to integrate it to your usual set of charts.
  • JL
    Jack L.
    6 August 2020 @ 22:21
    Fantastic interview, it explains and demonstrates in a practical way what it means to truly _play_ markets, rather than be played by them. One could say that Diego Parilla is the anti-Deden -- (as in Anthony) -- but they share an important commonality: both of them keep very large unlevered allocations to gold.
  • tw
    thomas w.
    6 August 2020 @ 08:54
    Dear Diego, please be so kind and post your roling sortino, or at least (min , max) seen in your portfolio over time. otherwise great interview and many thanks for your explanations. Best Thomas
    • CS
      Christopher S.
      6 August 2020 @ 22:15
      Quadriga Igneo
  • DT
    David T.
    6 August 2020 @ 18:41
    Diego sounds like one of the greatest investors obviously, with the very unique strategies. He was very open about specifics of his methods and strategies compared to some other investors that came to RV. Most of it was for fund managers but, still fascinating convictions and hypothesis for any investor. The only question I have is, how would an individual investor that is not an institution can use those strategies? Thumps up to Diego and RV team.
    • AC
      Adriano C.
      6 August 2020 @ 22:03
      Buy Gold.
  • ar
    andrew r.
    6 August 2020 @ 21:57
    Excellent interview. Diego I think was even more impressive the second time around.
  • KL
    Kunal L.
    6 August 2020 @ 13:28
    Raoul - how do we move into the insolvency phase if companies / EM sovereigns and corporates are able to issue debt easily in current environment of liquidity? Don’t we just get more “zombification”?
    • FS
      Fernando S.
      6 August 2020 @ 17:52
      Seems to me more zombification just leads to a much harder insolvency phase once conditions change beyond the tipping point but I haven't watched this video yet so just spit balling here
    • DS
      David S.
      6 August 2020 @ 21:00
      The Fed does not mind zombie companies as they keep the employment rolls higher. Congress prefers stasis with employment to resilience with lower employment. DLS
  • DT
    David T.
    6 August 2020 @ 18:33
    Diego, uno de los mejores interviews en RV. Tienes estrategia para hedge funds claro. Como inversor particular no puedo usar estrategias tan complicadas. Me cuesta entenderlas algunas estrategias. Pero, la quistión que tengo es, ¿por qué lo haces en España? Este “paraíso” socialista puede colapsar cualquier momento y los comunistas van a venir quitar todo lo que tienes y más. Creo que, el riesgo inmenso que tienes es riesgo político. How do you hedge that? Mucha suerte.
    • DS
      David S.
      6 August 2020 @ 20:52
      David T. - Good question, but much of the world is in similar shape. I am sure that Mr. Parrilla enjoys his home country - fabulous culture, cuisine, wine, landscapes, etc. I hope Mr. Parrilla and family are very happy. DLS
  • df
    dwight f.
    6 August 2020 @ 18:56
    One of my favorite PM. Give Hari also a call
  • DF
    Douglas F.
    6 August 2020 @ 16:51
    What are strikers and defenders?
    • LH
      Leigh H.
      6 August 2020 @ 18:39
      soccer analogy. strikers are scorers (money makers) and defenders are in the back to prevent giving up goals (protecting against losses.).
  • MA
    Muhammad A.
    6 August 2020 @ 18:35
    Absolutely loved the football analogy. This has to be one of the best RV pieces I have ever seen!
  • DO
    DIOGO O.
    6 August 2020 @ 12:48
    Excellent Interview!! Mr Parrilla must come back and talk to Mike Green!! Cheers Guys!
    • IW
      Ian W.
      6 August 2020 @ 17:18
      Oh man this would be a dream with two options guys talking to each other.
  • IW
    Ian W.
    6 August 2020 @ 17:16
    Holy f*ck.... this is like seriously the best RV video of all time. Not joking at all. That was a mind blowing deep dive into a lot of stuff I’ve personally been thinking about regarding my own options trading strategy. Hit a lot of the points I’ve been wrestling with (carry and the “team dynamic” of the portfolio), and reinforced a number of conclusions I’ve already been working on solidifying. Also I may have paused the video a dozen times to take notes and bought a few books on Amazon in the process. Many thanks to both of you guys for the great interview.
  • rr
    rlw r.
    6 August 2020 @ 16:52
    Thank you Raoul & Diego ... just an outstanding interchange.
  • HK
    H K.
    6 August 2020 @ 14:46
    a bit overboard with the football analogies, but great interview nevertheless :)
    • JS
      Jon S.
      6 August 2020 @ 16:12
      he is Spanish what do you expect :)
  • SK
    Stephen K.
    6 August 2020 @ 16:04
    Two classy guys...thanks so much. The conversation was great and very informative.
  • FL
    Fabrizio L.
    6 August 2020 @ 15:15
    Great interview, which one of the quadriga portfolios is Diego talking about?
    • DJ
      Dan J.
      6 August 2020 @ 15:51
      Looking at the website, it looks like he runs Igneo. http://www.quadrigafunds.com/igneo-2/
  • JO
    JY O.
    6 August 2020 @ 08:43
    What if you were to increase that 5% allocation to 20-30% instead, i wonder what will actually happen. I just don't see how he would lose that 5% in any manner it seems, unless the market really goes flat sideways for a decade, which is almost impossible. Great content as usual!
    • DJ
      Dan J.
      6 August 2020 @ 15:49
      2012 to 2015 would be pretty rough on that sort of portfolio, I think. Equities slowly grinding higher with very low vol. At 5%, I expect he has to work hard just to stay flat in that sort of environment. At 20%, you are not going to avoid years of drawdown. Maybe you are OK with that, looking at a longer time horizon, most investors are not. Tough to sell a fund like that.
  • EO
    Elena O.
    6 August 2020 @ 15:46
    loved Mr. Parrilla! Lots of thought-inspiring in the portfolio construction department. I studied portfolio construction models - and this is yet another way to approach portfolios from right and left tails - kinda in line with optionality view of the world. risk parity in a traditional sense as I see it is dead and 60/40 simple allocation is dead as well.
  • RH
    Rob H.
    6 August 2020 @ 12:48
    I have enjoyed every interview I've seen with Diego, I always learn something new and I have studied both of his books. If you liked this and want more look up the interview he did with Hedgeye on youtube, from what I remember he went into a different depth of his portfolio construction in that interview.
  • FG
    Frazer G.
    6 August 2020 @ 12:37
    Fantastic interview, great job.
  • JT
    Jason T.
    6 August 2020 @ 12:03
    Blink
  • PD
    Pieter D.
    6 August 2020 @ 11:54
    Excellent!
  • FO
    Frederic O.
    6 August 2020 @ 11:32
    Amazing video, as always with Diego.
  • av
    aleksandar v.
    6 August 2020 @ 10:39
    Fascinating! Would love a discussion between Mike Green and Diego Parrilla.
  • DP
    Daniel P.
    6 August 2020 @ 09:31
    As I've been telling my wife for many years, my r/wallstreetbets and robinhood subscriptions are just the 'attacking' part of my portfolio.
  • PB
    Pieter B.
    6 August 2020 @ 08:51
    This conversation was in my top 10 best interviews ever on Real Vision. Fascinating strategy backed up by outstanding performance figures. Thanks a lot to both of you.
  • AB
    Alastair B.
    6 August 2020 @ 05:27
    Great piece. Welcome back from holiday Raoul