Does anyone plan for Doomsday?

Don't trade against the daily trend.

Look back at 1929, 1987 etc.

Do you see a lower high? Do you see downwards movement before the critical day(s)?

Traders love such experiences. Investors discover that they have confused bull markets with brains.
 

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Quote from vetten:

but I reckon my plan for doomsday is so brilliant, because I never own any protection that will lose money outright and/or opportunity cost until doomsday comes around.

ofcourse I would have a tight stop loss in place for a couple of points at the time of entering my stop sell order for when the market goes against my position.

present price 1480
sell stop 1440
stop loss 1442

I chose ES futures, `cos it has far more liquidity than ES future options and that is very important if something happens in the middle of the night.

Any flaws in my plan?

:cool: :cool:
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The first flaw is that the ES can gap thru your stop. The second flaw is getting wipsawed. Let's say the market sells off, your ES stop is hit and you enter a short on ES, then the market rallies back 2 points to stop you out and then sells off again. To sum up, you've just made a 2 pt loss on ES and got no protection on your portfolio whatsoever.
 
Quote from TimeCorrosion:

No doubt there is increasing financial efficiency and sophistication in the recent years; an evidence is the low long term (30 year mortgage) interest rates. My Doomsday pictures is, for instance, the Dow gapping 1000 points past most reasonable stops, which would not offer any material protection. RS
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hi Time,

I dont agree that protection is not possible......... if my stop sell order for 7 ES futures is in the market virtuelly 24/7 there wont be any gapping for me.
When the news breaks before market opens, I would have short sold those futures and I will have the perfect protection for my portfolio.
No scurrying around to try to salvage anything, no panic for me!
I`ll have my money to play another day.:cool:
 
Quote from MTE:

The first flaw is that the ES can gap thru your stop. The second flaw is getting wipsawed. Let's say the market sells off, your ES stop is hit and you enter a short on ES, then the market rallies back 2 points to stop you out and then sells off again. To sum up, you've just made a 2 pt loss on ES and got no protection on your portfolio whatsoever.
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thanks MTE

yes it may run (not gap, I`m in the market 24/7) through my stop sell order, but I would get filled anyway. maybe a bit lower because of the fast market.

yes, maybe the stop is a bit tight.
on the other hand in a doomsday scenario, traders wont look right nor left.....everybody will try to get rid of their positions as fast as possible.

I dont think anyone can come up with a better solution where
a protection for somebodys` portfolio costs nothing in losses and/or opportunity costs for years on end.:cool:
 
Quote from vetten:

thanks MTE

yes it may run (not gap, I`m in the market 24/7) through my stop sell order, but I would get filled anyway. maybe a bit lower because of the fast market.

yes, maybe the stop is a bit tight.
on the other hand in a doomsday scenario, traders wont look right nor left.....everybody will try to get rid of their positions as fast as possible.

I dont think anyone can come up with a better solution where
a protection for somebodys` portfolio costs nothing in losses and/or opportunity costs for years on end.:cool:
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Maybe, maybe not. It's hard to say without the actual event taking place, but it's worth a try.
 
Quote from vetten:

thanks MTE

yes it may run (not gap, I`m in the market 24/7) through my stop sell order, but I would get filled anyway. maybe a bit lower because of the fast market.

yes, maybe the stop is a bit tight.
on the other hand in a doomsday scenario, traders wont look right nor left.....everybody will try to get rid of their positions as fast as possible.

I dont think anyone can come up with a better solution where
a protection for somebodys` portfolio costs nothing in losses and/or opportunity costs for years on end.:cool:
More...

A market order in a crash?
You´ll get a horrible fill.
 
Quote from ajna:

vetten,
Alternatively you could sell otm call spreads on an index.
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selling otm calls offers very little protection in a market crash. Your profit would be the call premium, which is miniscule compared to the losses you'd incur if you had a lot of long positions.
 
I asked this question a few weeks ago and didn't get many responses. The bottomline is, if you hold overnight positions and the market moves against you in a big way, say 12-20%, you are royally screwed. Depending on your leverage, your account could see a 90%+ loss. If you're not willing to accept this (small) risk, you should be in MM's and Tbills. long fotm puts are probably the best protection because of their leverage, but as others pointed out there's an opportunity cost.

I don't agree with people who say this could never happen again. The first cir breaker doesn't kick in until the dow drops 10%.
 
Quote from kiwi_trader:

Don't trade against the daily trend.

Look back at 1929, 1987 etc.

Do you see a lower high? Do you see downwards movement before the critical day(s)?

Traders love such experiences. Investors discover that they have confused bull markets with brains.
More...

Damn I love your posts but be careful. Traders don't like being cursed at and explaining the common sense of price movement to most traders is like calling their mothers something despicable.
 
Well, 10% of Dow right now is 1300 points. Imagine Dow drops 10% in a day.

Quote from deviltrader:

I asked this question a few weeks ago and didn't get many responses. The bottomline is, if you hold overnight positions and the market moves against you in a big way, say 12-20%, you are royally screwed. Depending on your leverage, your account could see a 90%+ loss. If you're not willing to accept this (small) risk, you should be in MM's and Tbills. long fotm puts are probably the best protection because of their leverage, but as others pointed out there's an opportunity cost.

I don't agree with people who say this could never happen again. The first cir breaker doesn't kick in until the dow drops 10%.
More...
 
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