Bernie Madoff and the Split-Strike Conversion
Bernie Madoff used a strategy of buying put options in SPX and selling calls. Then, he bought stocks which he carefully selects.
This mixture produces very stable returns and is one of the best strategies in options and commonly used among hedge funds today.
Split-Strike Conversion is a dressed up name Madoff used for a simple collar strategy.
Essentially, collars limit both the losses and gains for an investor who has bought a particular stock.
Today, all firms and funds use similar strategies to maintain long term steady growth.
See my ideas on how a large equity fund (17 billion) use simple quarterly options to produce the same steady growth.
Rise to Fame
Madoff was not part of the Wall Street crowd and started his investing career in penny stocks the same way Jordan Belford did as portrayed in the Wolf of Wall Street.
Madoff became wildly successfully claiming his split-strike conversion was the best way to make large and steady returns.
Madoff was consistent in generating 10-20% per year in 1992 which wasn’t that far off the S&P 500 annual return.
Trouble started for Madoff when he was reporting an undisclosed commission instead of a standard hedge fund fee.
Madoff was active on Wall Street from 1960 until 2008 when his fund collapsed under the pressure of the Great Financial Crisis.
Deposits and Redemption, the Ponzi scheme
Madoff’s Ponzi scheme was simple. Claim big returns to investors to generate more deposits then redemptions.
His fund looked very enticing, I can see why he generated billions of dollars in inflows.
Bernie would simple pay people wanting to cash out with the money new investors would bring in.
It makes me think that Madoff would have been a crypto God had he not been so arrogant as to not expect a financial crisis.
Mark Twain said, “History never repeats itself, but it does often rhyme”
How many other Madoff like schemes are out there today, just cruising under the radar until the next financial crisis.
Look what recently happened with all the crypto funds collapsing as bitcoins price bears down to lowest prices since its rise to glory.
Are these signs of a much broader problem or are they just the outliers getting their just deserts.
Thanks for reading, please boost if you enjoyed the idea and follow @spyvsgme for more ideas published regularly.
Bernie Madoff used a strategy of buying put options in SPX and selling calls. Then, he bought stocks which he carefully selects.
This mixture produces very stable returns and is one of the best strategies in options and commonly used among hedge funds today.
Split-Strike Conversion is a dressed up name Madoff used for a simple collar strategy.
Essentially, collars limit both the losses and gains for an investor who has bought a particular stock.
Today, all firms and funds use similar strategies to maintain long term steady growth.
See my ideas on how a large equity fund (17 billion) use simple quarterly options to produce the same steady growth.
Rise to Fame
Madoff was not part of the Wall Street crowd and started his investing career in penny stocks the same way Jordan Belford did as portrayed in the Wolf of Wall Street.
Madoff became wildly successfully claiming his split-strike conversion was the best way to make large and steady returns.
Madoff was consistent in generating 10-20% per year in 1992 which wasn’t that far off the S&P 500 annual return.
Trouble started for Madoff when he was reporting an undisclosed commission instead of a standard hedge fund fee.
Madoff was active on Wall Street from 1960 until 2008 when his fund collapsed under the pressure of the Great Financial Crisis.
Deposits and Redemption, the Ponzi scheme
Madoff’s Ponzi scheme was simple. Claim big returns to investors to generate more deposits then redemptions.
His fund looked very enticing, I can see why he generated billions of dollars in inflows.
Bernie would simple pay people wanting to cash out with the money new investors would bring in.
It makes me think that Madoff would have been a crypto God had he not been so arrogant as to not expect a financial crisis.
Mark Twain said, “History never repeats itself, but it does often rhyme”
How many other Madoff like schemes are out there today, just cruising under the radar until the next financial crisis.
Look what recently happened with all the crypto funds collapsing as bitcoins price bears down to lowest prices since its rise to glory.
Are these signs of a much broader problem or are they just the outliers getting their just deserts.
Thanks for reading, please boost if you enjoyed the idea and follow @spyvsgme for more ideas published regularly.
