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10/13 Swan Global Company Night

Updated: Oct 21, 2022

This past Thursday, we had the pleasure of hosting Swan Global Investments for a company night! Our members got a great introduction to the options market, a novel investing perspective, and the opportunity to learn more about family offices. Here are some of the highlights, and we have also included a link and attachments to several resources Swan thought might be helpful:



Speaker Backgrounds

  • Randy Swan - UT MPA grad

    • Graduated in 1990

    • Began working at KPMG

    • Always interested in investing

  • Gene Miller - worked for 30 years in public accounting

    • Runs Randy’s family office

    • Has invested his money with Randy since late 90s

  • Randy and Gene met at KPMG

About Swan

  • Have 5 mutual funds and 1 ETF

  • Manage $2.5 billion

  • Simplified version of strategy is putting 90% in SPY and then putting the other 10% in options to hedge risk

    • 90/10 split varies based on day to day volatility of option and stock prices

  • Randy’s strategies outperformed market during worst periods - burst of Dotcom Bubble and Great Recession

  • They do have investors who come from value or growth mindsets and want customized portfolios based on those strategies

    • Swan charges a higher minimum for these portfolios

  • Their perspective is to have them worry about the options trading rather than the clients because options trading is a full time occupation

  • Based in Durango, Colorado

    • Randy lives in Puerto Rico

    • Have people employed full time to watch market and trade options

Investing Philosophy

  • Randy’s investing philosophy is based in options investing - believes that diversification does not eliminate market risk

    • Market risk - one asset class or segment of market is correlated with others, so other asset classes or market segments will also perform poorly if one does

  • Reject stock picking and any particular investment strategies - ex. Value, growth, dividend

  • Dislike using always, but yes, there always is a tradeoff between risk and return

  • Difficult for individuals to enter into options since there is a particular financial philosophy that Swan does not agree with, that they are coming from

    • Financial advisors also have this philosophy, so Swan also tries to focus on education

  • Most individuals involved in options are day traders

    • This is a good way to learn about options, but not good for the long term options strategies that Swan does

    • If you want to start learning more about options and trading options, they suggest using thinkorswim platform

  • Put option - contract that gives buyer the right to sell a security at a specified price, known as the strike price

    • Price of the option refers to the price the buyer pays to get this right

    • Can be bought or sold

  • Call option - contract that gives buyer the right to purchase a security at a specified price

  • In the money - security’s current price is higher than strike price for call option, current price is less than strike price for put option

  • Out of the money - security’s current price is lower than strike price for call option, current price is higher than strike price for put option

  • For investors who are more growth oriented and willing to accept more risk, they might purchase put options that are further out of the money

    • They might also buy something like a call spread to increase their exposure

  • Swan is trying to address diversification, and what they see as the shortcomings of diversification in regards to its central goal of reducing risk

  • Their point is that while yes, long term investing can sustain 15%-20% drops and recover, this takes an extremely long time for 40%-50% drops that cost the investor time when they could be growing their wealth

    • Conventional portfolios and strategies are not well suited to these major market declines

Resources




 
 
 

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