Hedging the S&P500

[ShameSalad]

0.5%%%%%

Do you consider that percent even enough???
I could see 5%. But 0.5% wouldn't even make a difference.

Yes, I've considered the %. Anything much higher than 0.5% is too much of a headwind. My returns get better without an additional hedge at that point.

I'm looking at SPY put 200 strike from 0.24 to 14.45 (1/2/20 and 3/18/20 respectively). That type of price increase looks good for a hedge at only 0.5%. There are similar results for UVXY calls at strikes 90 and 100. These are for 6 month options.

 

[S2007S]

Yes, I've considered the %. Anything much higher than 0.5% is too much of a headwind. My returns get better without an additional hedge at that point.

I'm looking at SPY put 200 strike from 0.24 to 14.45 (1/2/20 and 3/18/20 respectively). That type of price increase looks good for a hedge at only 0.5%. There are similar results for UVXY calls at strikes 90 and 100. These are for 6 month options.

Uvxy can be extremely impressive and can easily catapult insanely high with a just a tad bit of fear in the market.


Impressive put on spy after the collapse. According to 99.9% of articles and people interviewed on cnbc and other financial networks there is literally zero chance of the markets every going back to March lows.

 

[Grantx]

When the shit hits the fan soon (and it will!)

People have been saying that for the entire duration of this rally lol.

 

[murray t turtle]

How about buying a inverse SPY ETF.
the 1x SPDN for example is sufficiently liquid

%%
That could work well.
Selling + selling every now + then can work well, like some today.Invese etfs, most of them pay a dividend, believe it or not.
I got up set a bit because I missed a dividend earlier in the year; but was better off selling + buying it back with no or ,low conditions.............................................................
We are over due for a summer corection selling some /making a profit realized, helps, in addition to un realized gains

 

[S2007S]

People have been saying that for the entire duration of this rally lol.

It eventually will. Who knows when. Maybe in 7 or 17 years

 

[Fonz]

Most of time, hedging a "buy and hold" portfolio will make things worse in the long term, especially with put options.
Buying a short term put option when the sky is falling is way less damaging. You could use SPX instead of SPY, depending of your portfolio size : Less contracts = less commissions, and it is taxed as a 1256 contract in the US, instead of short term capital gains.

You could also check https://www.portfoliovisualizer.com/backtest-asset-class-allocation to see what does gold or other assets exposures to a portfolio.

 

[ShameSalad]

Most of time, hedging a "buy and hold" portfolio will make things worse in the long term, especially with put options.
Buying a short term put option when the sky is falling is way less damaging. You could use SPX instead of SPY, depending of your portfolio size : Less contracts = less commissions, and it is taxed as a 1256 contract in the US, instead of short term capital gains.

You could also check https://www.portfoliovisualizer.com/backtest-asset-class-allocation to see what does gold or other assets exposures to a portfolio.

Thanks for that recommendation.

I've used the website you suggested before. It's a great tool. I'm happy with my asset allocation. However, the Covid market seemed to make everything fall.

 

[Girija]

I currently have a portfolio that was hit hard during the Covid-19 fall that bottomed out this past March (-40%). Thankfully, I'm close to breakeven on the at today. The portfolio is a variation of a Risk Parity portfolio with allocations in Gold, Bond, and Equities.

I did consider this portfolio already hedged with the Gold and Bonds prior to Covid. But now I am looking for some additional hedging. My current thoughts are to buy OTM puts or calls on a variety of S&P500 related items (VIX, SVXY, UVXY, UPRO) that are 6 months out. Ideally, I would be wanting to allocate 0.5% of the portfolio to this option hedge.

I did some quick historical price checking on the options with TOS onDemand feature. Hopefully, these prices are historically accurate. But the only option play that looked promising was OTM UVXY call strikes 6th months out (strike prices 90 and 100) and 1 year out (strike price 180).

The goal of this hedge isn't to see high returns given a down market but to more or less weather the storm. If the market is down 30% and I'm down 10%, I would consider that success.

Looking at buying the OTM calls for UVXY for Jan21, the options are not liquid and have large spreads. So, of course, implementing this hedge isn't as easy as I was hoping.

Are there other hedging strategies or vehicles that I can investigate? Has anyone else discovered a good hedging alternative?

Any insight or feedback is greatly appreciated. Thanks in advance!

Usually it is not a wise idea to buy options on uvxy or svxy. As mentioned in the other threads you can hedge using futures / index options. i am not sure if there is any more room in gold.

 

[Poljot]

SPX Index Puts and/or VIX Calls.

 

[taowave]

What percent of spot are you willing to spend and would you consider selling upside to partially offset the protection? If so,what percent of spot call would you be good with selling....

Whats the apx beta on your portfilio?