Thanks everyone for the input. I had originally considered some no cost 1x2s in SPY puts but at the time was thinking about a static insurance policy that would be sized so that I would be protected if fully leveraged long. Because of the large size, the thought of a few expirations pinning at my long strike made this less attractive. However, if I get in and get out (and only put on the size required at the time), this may be the way to go. It offers the protection I'm looking for and the greeks are relatively flat within a modest trading range. I would probably select strikes to lean it very slightly long delta only to mitigate any vega losses in a rally.
I like the thought of doing the same trade in one of the vol products, but getting the size right could be tricky (although it probably is the best bang for your buck if we're simply talking about a massive move). The other thing that concerns me with them (and I don't want to sound like too much of kook here) is the settlement on say a vix futures after an event like we're discussing. How long does the market stay closed after something like that? 1 month? 3 months? Who knows, but I'd hate to have the insurance theoretically perform but never be able to realize the gains. In SPY this seems less likely to be an issue. Of course, there's also the bid/ask spread comparison between SPY vs. any vol product's options. I'd almost certainly have to go with a static hedge in a vol product, where whipping around some 1x2s in SPY isn't necessarily prohibitive. Interested in hearing more thoughts on any of this.
I like the thought of doing the same trade in one of the vol products, but getting the size right could be tricky (although it probably is the best bang for your buck if we're simply talking about a massive move). The other thing that concerns me with them (and I don't want to sound like too much of kook here) is the settlement on say a vix futures after an event like we're discussing. How long does the market stay closed after something like that? 1 month? 3 months? Who knows, but I'd hate to have the insurance theoretically perform but never be able to realize the gains. In SPY this seems less likely to be an issue. Of course, there's also the bid/ask spread comparison between SPY vs. any vol product's options. I'd almost certainly have to go with a static hedge in a vol product, where whipping around some 1x2s in SPY isn't necessarily prohibitive. Interested in hearing more thoughts on any of this.
