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
Quote from William Rennick:

What the hell, a riviting post.!!What happens next,??? Better than a Stephen King thriller. BRAVO,BRAVO

...Rennick
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An intraday gap.

There are many scenarios, even if you only want to talk about ones that actually happened

I apologize for the drama, but I was using it to try and get a very important point across to those that believe Gaps may be gone (except for Sunday night).

... the point is: Gaps have not gone away, we just haven't seen one in a few years on the equities contracts.

And: A STOP is not effective against a situation like this (even you intraday traders).

But, a PUT or CALL works nicely as a hedge (as long as it doesn't expire while the markets are still closed ... thinking 9/11).

danoXP

ps. As an aside, I don't believe Globex supports STOP (market) as a native order type.
 
I do recall having the ES go 50 + points up in < 1 minute. This was a news event related to Greenspan, but it was unplanned and unexpected. I remember having my stop order filled within 3 points of the high. 1 minute later it was back down.

Stops aren't a hedge, and they only work in liquid markets.

Liquidity stops at the door if extreme volatility is in the room.

I also recall a highly leveraged futures trader who bought option wings everyday. He had risk management work out the buying and selling of the wings everyday and calculated it as a cost of doing business. He did quite well, and the firm and hiself was never worried about extreme volatility intraday.

One thing that stock traders did at the firm was buy wings (otm options) and scalp the stock at each end, knowing they could hold if needed. They did this if they thought it was range bound over several weeks. So they planned on intraday trading, but they used the hedges as crutches to let them average in and out, or hold for longer until it came back down.
 
Quote from swinger:

thats what stop losses are for.
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====================
Funny, but lots of truth there:cool:

Some brand name stocks gave weekly clear sell signals AUG,SEPT,OCT;
but not all stocks did, OCT 1987.

Pabst, correct this if its wrong , cause was not actively trading then;
short calls should have done great, but they dropped so slow, messed a lot of people up anyway .

Also long puts which probably would be great in short sudden drop;
long puts could easily do horrible in a FED suprise rate cut.......

Jan 20-2006 could have just as easily been much worse;
however many oil/gas stocks kept on UP trending.

Time frame diversification could help, many stocks had UP year in 1987, despite drop ,OCT 87;
some short term traders hit home runs nicely ,
like they have in energy stocks lately.

Trends can help; over leverage hardly ever helps much .


:cool:
 
Quote from danoXP:

My friend. You just haven't seen one yet. And, just make sure that when you do ... it is not your last.

... when it comes, and you are watching, it may look like this:

You are watching TWS IB trading ES during the day. Nice tight spread of the usual 1 tick.

Stop order protecting your position.

All of a sudden Globex halts trading ES.

The Bid, Ask, and LAST turn light blue.

You notice also the NYSE stocks are out also. Then the Nasdaq stocks stop trading also.

Something has happened?! ... then the news comes over CNBC "... ... "

... the bids, asks dissapear.
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I'm talking about gaps as a normal course of everyday business, not on some news event. I've been trading for 25 years and have seen most of what the market has to offer. From my other posts , you can see that I have myself at 1 to 1 leverage and so a gap like what you are speaking of will not "take me out"
 
you are speaking about a news event I believe and not and everyday, normal course of business, overnight gap. The day to day gap is what I question existence of.
 
Quote from Buy1Sell2:

I should clarify just a bit further. I am speaking of the ES futures, not actual stocks. I do not trade individual stocks.
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I would question the validity of this claim.
 
Quote from Hamlet:

If you are an intraday trader you have no business trading at all if you think you need a hedge against an extreme intraday move. I am actually confused about why you would think a daytrader would ever concern himself with hedging against an extreme move rather than hoping that one would occur so that he can jump all over it! Perhaps you are new?
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Hamlet, IMO you have a point in the sense that some intraday strategies bear less risk because of the very short holding period (on average) and assuming you can easily flip your position if you're caught on the wrong side. I think those variables should be considered when calculating risk. However I met a trader who blew up his account scalping a biotech stock a couple of years ago: he was holding a few thousands shares long, looking to capture 20-30c when the stock was suddenly halted for some company annoucement. It reopened dollars lower. That's it. Game over.

Then again, you could argue that no matter what you do to hedge, there's always a minimum amount of risk of ruin involved.
 
Quote from Buy1Sell2:

The day to day gap is what I question existence of.
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There were 3 50 points gaps in January for YM futures.(for ES that would be 4-5 points), and lots of smaller ones. For gap reference see my journal called MR statistics in the Strategy trading section...
 
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