A Lesson in Hedging
As you all well know, I'm bearish going into the end of the year. Over the last two days however, these bearish positions have taken a beating. I'm hoping to catch some relief at the resistance levels we ran into on Thursday, but only time will tell. The market opened almost perfectly flat, but has rallied a few points at the time of this post. Here's the play I'm looking to initiate if we have another rally today and get above yesterday's high of 109.94 in the SPY. Once we hit 110.00 I'll be looking to buy the 110 August calls, this hedges me in my December puts. You may ask why not just close out my December positions and wait for a re-entry? The basic answer is so I'm ready for the decline. If you look at the rally from June 8th to June 21st, you'll see it was quite powerful, but fell off that cliff into July 1st even more quickly. Rather than try to buy until the peak, then sell at the peak, I'll hedge until we're able to get a sell off, then I'll be ready.