I want to hedge against a drop in the S&P from today vs. about 9 months from now. For every 1% drop from today, I want $1000 protection. So in approx. 9 months if the S&P is down 50% from today I need $50,000 coverage, if its down 10% from today i want $10,000 coverage, etc. What would give me the best protection for the least cost?
Best hedge against market drop
- Thread starter levijean
- Start date
Buy an ATM option put ?
But you would have to monitor,
Since the option can lose in value ...
Due to time erosion (Theta). The only risk.
Well, some better experienced than me could answer.
But I think an option put on the SPX or ES is the way to go.
@Handle123 use to hedge his bets with option. He may help you.
But you would have to monitor,
Since the option can lose in value ...
Due to time erosion (Theta). The only risk.
Well, some better experienced than me could answer.
But I think an option put on the SPX or ES is the way to go.
@Handle123 use to hedge his bets with option. He may help you.
Last edited:
rmorse
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All hedges have a cost. If I expected the market to drop more than10%, I would just sell out my portfolio.
I'm not "expecting" a drop, its for insurance purposes. I dont expect my house to catch on fire or to get in a car accident...
Exactly. Cash is a position. If a trader is concerned enough about the market to be paying high rates for protection, the trader should consider going partially or fully to cash.
Homeowners insurance is cheap. Portfolio insurance is not.
maybe because markets go down more often than houses catch on fire?