Do *you* hedge against a total *intraday* market crash?

Do *you* hedge against a total *intraday* market crash?

  • Yes

    Votes: 10 15.9%

  • No

    Votes: 53 84.1%
  • Total voters
    63
perhaps not and that is why you will see from other of my posts that I never, I mean never , overextend myself. 20 percent of my liquid net worth is in my trading account, I never use more than 5 to 1 leverage, which means that I am really 1 to 1 in terms of my overall capitalization. The only reason that I don't hold long over the weekend , is just to limit unnecessary drawdown.
 
Quote from xtrhvydty:

It's funny when this topic comes up - I came from a profession where my whole profession centered around worst case scenarios. So it is so deeply ingrained in my blood to "prepare for the worst." I would never have a sizable long porfolio that is not hedged by some combination of puts. Also, I will never trade anything that is leveraged with unlimited risk. That means naked puts, ES futures etc. Just my style. I go to sleep with full knowledge of my max possible loss. Stops (just a market order)will not save you from a massive gap down opening. I also keep a sizable amount of trades which are straight long puts, i.e., shorting without the unlimited risk. I love it when the market tanks.
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What profession is that if you dont mind me asking?

Do you buy puts and sell calls to offset the cost of buying puts (ie a "collar") or do you just buy puts? Out of the money ? at the money? Also how do you determine how many you need to buy to cover yourself?
 
Quote from Buy1Sell2:

perhaps not and that is why you will see from other of my posts that I never, I mean never , overextend myself. 20 percent of my liquid net worth is in my trading account, I never use more than 5 to 1 leverage, which means that I am really 1 to 1 in terms of my overall capitalization. The only reason that I don't hold long over the weekend , is just to limit unnecessary drawdown.
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So you accept the very small possibility that you may lose 75% of your net worth if the market crashes 75% on a weekday, correct?
 
yes that is correct, however I have a better chance of getting my stop hit than the poor unfortunate 401k'rs that can't intraday.
This would be of course if the ES was the only thing in my trading account and I was fully at 5 to 1
 
A few good archived threads explore the possibility of hedging against a crash.

Most of the '87 veterans concluded broker-relegated stops were useless when 'everyone heads for the door at the same time.'

What else can a trader do but buy puts?
 
Where did you get this number 75% from? The guy was just trying to explain what is the ratio between his leverage & his net capital.
 
Do you consider a stop in the Globex computer to be a broker regulated stop? There may be some here that would contend that pit stops are different than electronic stops
 
Quote from gkishot:

Where did you get this number 75% from?
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Its just an arbitrary number from the dark side of my imagination..Do you think we can safely discount the possibility that the market can drop 75% in one day? :)
 
Quote from giggollo:

Its just an arbitrary number from the dark side of my imagination..Do you think we can safely discount the possibility that the market can drop 75% in one day? :)
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If the market drops 20% in one day of course he is going to lose his leverage amount without a protection. But not necessarily his collateral if for example he keeps it in cash. But this possibility is very remote.
 
He's right --at 5 to 1 if I was fully used up in the trading account and the market tanked 75%, I would have to meet a margin call and I would be digging deep into the collaterall
 
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