u/Blue_Mushroom3100

I've been thinking about a tail hedge structure I read about recently, keeping a small persistent long position in 25-30% OTM puts with 30-60 day maturities, rolling them as they approach expiration. Sized at maybe 5-8% of total portfolio NAV, scaled up to 8% in elevated-vol regimes.

The math is straightforward: you bleed 4-6% per year in calm regimes, but the structure pays off roughly 12-25x cost in a fast 25%+ drawdown event. The asymmetry is favorable over a long horizon, assuming you have the discipline to hold it through the calm periods. (The book I picked this up from calls it the "Tail Hedge Overlay" - Harrison, The Asymmetric Regime Framework (arf). He's running it against a long/short crypto book, but I think the same structure aplies more broadly to any portfolio with non-linear stress correlations.)

Two specific aspects I'd like to compare notes on:

1. The bleed psychology. Running a persistent OTM put structure for a year or more is harder than the math suggests. The behavioral reality is that watching your hedge bleed every month while the market grinds higher is brutal. The temptation to "pause" the hedge during calm regimes is enormous, and it's exactly the wrong move - the times you'd want to pause are the times right before you needed it. The mechanism that's worked for me is making the sizing rule mechanical and removing the discretionary element entirely. Curious whether others have settled on similar discipline mechanisms or whether you've gone in a different direction.
2. Sizing the strikes. The strike selection question is harder than it looks. 15% OTM puts give you more responsiveness — they pick up gamma fastre in moderate moves - but they cost meaningfully more per dollar of payoff. 40% OTM puts are cheap but only pay off in true crashes, which means most "stress events" leave you holding worthless options. The 25-30% range feels like a reasonable midpoint, but I haven't seen the cost-adjusted payoff curve analyzed cleanly anywhere. My intuition is that it depends heavily on whether you're hedging against drawdowns specifically (favoring closer strikes) or against blow-up risk (favoring further-out strikes).

A few things I'm explicitly not posting about:

• Specific trade ideas or current positions
• Whether tail hedging is worth it in general (assuming the reader is convinced of the underlying argument)
• Crypto-specific implementation — the discipline question is what generalizes

Originally got interested in this for a crypto book (BTC/ETH listed options have gotten liquid enough on Deribit and CME), but the same structural questions apply to SPX puts on equity exposure or FX options on currency portfolios. The underlying changes; the structure does not.

Posting here to compar notes with others who have actually run this kind of structure live.

I've been thinking about a tail hedge structure I read about recently, keeping a small persistent long position in 25-30% OTM puts with 30-60 day maturities, rolling them as they approach expiration. Sized at maybe 5-8% of total portfolio NAV, scaled up to 8% in elevated-vol regimes.

The math is straightforward: you bleed 4-6% per year in calm regimes, but the structure pays off roughly 12-25x cost in a fast 25%+ drawdown event. The asymmetry is favorable over a long horizon, assuming you have the discipline to hold it through the calm periods. (The book I picked this up from calls it the "Tail Hedge Overlay" - Harrison, The Asymmetric Regime Framework (arf). He's running it against a long/short crypto book, but I think the same structure aplies more broadly to any portfolio with non-linear stress correlations.)

Two specific aspects I'd like to compare notes on:

1. The bleed psychology. Running a persistent OTM put structure for a year or more is harder than the math suggests. The behavioral reality is that watching your hedge bleed every month while the market grinds higher is brutal. The temptation to "pause" the hedge during calm regimes is enormous, and it's exactly the wrong move - the times you'd want to pause are the times right before you needed it. The mechanism that's worked for me is making the sizing rule mechanical and removing the discretionary element entirely. Curious whether others have settled on similar discipline mechanisms or whether you've gone in a different direction.

2. Sizing the strikes. The strike selection question is harder than it looks. 15% OTM puts give you more responsiveness — they pick up gamma fastre in moderate moves - but they cost meaningfully more per dollar of payoff. 40% OTM puts are cheap but only pay off in true crashes, which means most "stress events" leave you holding worthless options. The 25-30% range feels like a reasonable midpoint, but I haven't seen the cost-adjusted payoff curve analyzed cleanly anywhere. My intuition is that it depends heavily on whether you're hedging against drawdowns specifically (favoring closer strikes) or against blow-up risk (favoring further-out strikes).

A few things I'm explicitly not posting about:

• Specific trade ideas or current positions
• Whether tail hedging is worth it in general (assuming the reader is convinced of the underlying argument)
• Crypto-specific implementation — the discipline question is what generalizes

Originally got interested in this for a crypto book (BTC/ETH listed options have gotten liquid enough on Deribit and CME), but the same structural questions apply to SPX puts on equity exposure or FX options on currency portfolios. The underlying changes; the structure does not.

Posting here to compar notes with others who have actually run this kind of structure live.

I've been thinking about a tail hedge structure I read about recently, keeping a small persistent long position in 25-30% OTM puts with 30-60 day maturities, rolling them as they approach expiration. Sized at maybe 5-8% of total portfolio NAV, scaled up to 8% in elevated-vol regimes.

The math is straightforward: you bleed 4-6% per year in calm regimes, but the structure pays off roughly 12-25x cost in a fast 25%+ drawdown event. The asymmetry is favorable over a long horizon, assuming you have the discipline to hold it through the calm periods. (The book I picked this up from calls it the "Tail Hedge Overlay" - Harrison, The Asymmetric Regime Framework (arf). He's running it against a long/short crypto book, but I think the same structure aplies more broadly to any portfolio with non-linear stress correlations.)

Two specific aspects I'd like to compare notes on:

1. 1The bleed psychology. Running a persistent OTM put structure for a year or more is harder than the math suggests. The behavioral reality is that watching your hedge bleed every month while the market grinds higher is brutal. The temptation to "pause" the hedge during calm regimes is enormous, and it's exactly the wrong move - the times you'd want to pause are the times right before you needed it. The mechanism that's worked for me is making the sizing rule mechanical and removing the discretionary element entirely. Curious whether others have settled on similar discipline mechanisms or whether you've gone in a different direction.
2. Sizing the strikes. The strike selection question is harder than it looks. 15% OTM puts give you more responsiveness - they pick up gamma fastre in moderate moves - but they cost meaningfully more per dollar of payoff. 40% OTM puts are cheap but only pay off in true crashes, which means most "stress events" leave you holding worthless options. The 25-30% range feels like a reasonable midpoint, but I haven't seen the cost-adjusted payoff curve analyzed cleanly anywhere. My intuition is that it depends heavily on whether you're hedging against drawdowns specifically (favoring closer strikes) or against blow-up risk (favoring further-out strikes).

A few things I'm explicitly not posting about:

• Specific trade ideas or current positions
• Whether tail hedging is worth it in general (assuming the reader is convinced of the underlying argument)
• Crypto-specific implementation — the discipline question is what generalizes

Originally got interested in this for a crypto book (BTC/ETH listed options have gotten liquid enough on Deribit and CME), but the same structural questions apply to SPX puts on equity exposure or FX options on currency portfolios. The underlying changes; the structure does not.

Posting here to compar notes with others who have actually run this kind of structure live.

I've been thinking about a tail hedge structure I read about recently, keeping a small persistent long position in 25-30% OTM puts with 30-60 day maturities, rolling them as they approach expiration. Sized at maybe 5-8% of total portfolio NAV, scaled up to 8% in elevated-vol regimes.

The math is straightforward: you bleed 4-6% per year in calm regimes, but the structure pays off roughly 12-25x cost in a fast 25%+ drawdown event. The asymmetry is favorable over a long horizon, assuming you have the discipline to hold it through the calm periods. (The book I picked this up from calls it the "Tail Hedge Overlay" - Harrison, The Asymmetric Edge. He's running it against a long/short crypto book, but I think the same structure applies more broadly to any portfolio with non-linear stress correlations.)

Two specific aspects I'd like to compare notes on:

1. The bleed psychology. Running a persistent OTM put structure for a year or more is harder than the math suggests. The behavioral reality is that watching your hedge bleed every month while the market grinds higher is brutal. The temptation to "pause" the hedge during calm regimes is enormous, and it's exactly the wrong move. The times you'd want to pause are the times right before you needed it. The mechanism that's worked for me is making the sizing rule mechanical and removing the discretionary element entirely. Curious whether others have settled on similar discipline mechanisms or whether you've gone in a different direction.
2. Sizing the strikes. The strike selection question is harder than it looks. 15% OTM puts give you more responsiveness. They pick up gamma faster in moderate moves, but they cost meaningfully more per dollar of payoff. 40% OTM puts are cheap but only pay off in true crashes, which means most "stress events" leave you holding worthless options. The 25-30% range feels like a reasonable midpoint, but I haven't seen the cost-adjusted payoff curve analyzed cleanly anywhere. My intuition is that it depends heavily on whether you're hedging against drawdowns specifically (favoring closer strikes) or against blow-up risk (favoring further-out strikes).

A few things I'm explicitly not posting about:

• Specific trade ideas or current positions
• Whether tail hedging is worth it in general (assuming the reader is convinced of the underlying argument)
• Crypto-specific implementation-the discipline question is what generalizes

Originally got intrested in this for a crypto book (BTC/ETH listed options have gotten liquid enough on Deribit and CME), but the same structural questions apply to SPX puts on equity exposure or FX options on currency portfolios. The underlying changes; the structure does not.

Posting here to compare notes with others who have actually run this kind of structure live.

Anyone actually running Harrison's framework? What does it feel like in practice?

I've read the book (The Asymmetric Regime Framework) twice. The math makes sense. The Practitioner's Diary chapters were sobering. But there's a gap between "this is what the strategy does" and "this is what it's like to run it."

Curious to hear from anyone who's deployed even a simplified version. Especially interested in the boring parts — what does a normal week look like? When do you actually look at it? How do you resist the urge to mess with it?

I am a bit confused where to start the pine programming on it!

Anyone actually running Harrison's framework? What does it feel like in practice?

I've read the book (The Asymmetric Regime Framework) twice. The math makes sense. The Practitioner's Diary chapters were sobering. But there's a gap between "this is what the strategy does" and "this is what it's like to run it."

Curious to hear from anyone who's deployed even a simplified version. Especially interested in the boring parts — what does a normal week look like? When do you actually look at it? How do you resist the urge to mess with it?

Anyone actually running Harrison's framework? What does it feel like in practice?

I've read the book (The Asymmetric Regime Framework) twice. The math makes sense. The Practitioner's Diary chapters were sobering. But there's a gap between "this is what the strategy does" and "this is what it's like to run it."

Curious to hear from anyone who's deployed even a simplified version. Especially interested in the boring parts — what does a normal week look like? When do you actually look at it? How do you resist the urge to mess with it?