Hedging the S&P500

[xandman]

Gold failed as hedge back in March. Big Time. It may do so again.

 

[Tradex]

Has anyone else discovered a good hedging alternative?

Don't bother with put options, inverse ETFs or short positions in the futures market, just dump any stock that drops below its 200 day simple moving average (or even its 100), simple as that.

This simple, almost stupid rule can prevent ANY stock market crash from damaging your portfolio. Plus you can always re-enter later, if the uptrend resumes.

Put these moving averages on the chart and see for yourself...

 

[Captain Caveman]

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

True, but pressure is building everyday. Companies increasing rapidly in market cap while many at record low profits. EPS is at its lowest since 2008. Shows that investor are looking for capital growth and dividend a distant second.
All I'd say is keep an eye out. I cashed out of my etf a week ago, too soon it appears. I recently shorted it and down $1500 atm so double hit .Called it wrong so far. I'm waiting for some moderate pullback or market to get spooked to reduce losses

 

[taowave]

I wonder if anyone has ever backdated this strategy

Don't bother with put options, inverse ETFs or short positions in the futures market, just dump any stock that drops below its 200 day simple moving average (or even its 100), simple as that.

This simple, almost stupid rule can prevent ANY stock market crash from damaging your portfolio. Plus you can always re-enter later, if the uptrend resumes.

Put these moving averages on the chart and see for yourself...

 

[traderking007]

this is a high tax sttategy depending on how long u hold the stock before selling?
just short a similar companybin the same industry or a competitor. thats what i do. then lift that short when ur comfortabkle not being hedged. pretty simple n guess what it works

 

[Atikon]

this is a high tax sttategy depending on how long u hold the stock before selling?
just short a similar companybin the same industry or a competitor. thats what i do. then lift that short when ur comfortabkle not being hedged. pretty simple n guess what it works

Not if you hedge with spx options + spx is 10x the size of spy so your transaction cost come down by half

 

[ShameSalad]

Gold failed as hedge back in March. Big Time. It may do so again.

I agree. But I still think it is a good hedge in normal bear markets.

What would you suggest as an alternative to gold? Hedging only with options/fututres?

 

[Captain Caveman]

What would you suggest as an alternative to gold? Hedging only with options/fututres?

cash , Treasury bonds

can always buy a S&P inverse ETF to lock in a floor, Not leveraged ETF though

 

[Girija]

cash , Treasury bonds

can always buy a S&P inverse ETF to lock in a floor, Not leveraged ETF though

No way there is simply no value in those rt now.

 

[ShameSalad]

A bit busy now. Do some reading here and ask if you have questions after that.

But basically, you just sell X number of e-mini S&P 500 futures contracts. You need to calculate how many based on the worth of your portfolio. There's e-micros available also, so you should easily be able to create a hedge in which any way you want.

If the market falls you'll profit on your futures contract which offset the loss in your portfolio. If the market rises you'll lose your portfolio gains to offset your futures contract loss.

One way to hedge could be to have a sell order resting in the market, but a bit below the current market. That way it's not triggered unless the market actually takes a dive. That's probably what I would do.

Options can be more sexy, but generally requires a bit more brain power and knowledge.

https://www.cmegroup.com/education/whitepapers/hedging-with-e-mini-sp-500-future.html

Looking into some historical prices of the e-mini S&P500 futures contracts and did some quick hedging scenarios. It is a good way to hedge the downside, but the upside gets hit hard if the market goes up. I do like the option play a little better since the prices can grow exponentially which is the type of growth I would need for this hedge to make since.

Or am I still missing something when hedging with futures?