How to hedge SPY?

[murray t turtle]

I got smacked the other day: long on a basket of about 20 equities from different sectors in the SnP, thinking that sector diversity would protect me from any big moves... but they all got away from me together! Grr...

How would you hedge downside risk for SPY? A couple ideas I have: (all price-normalized):

- Set up pairs for each of the sectors, like T and VZ. Long one, short the other. Pretty much a classic pair trade, but I'm using it as a hedging device.
- Long SPY, short DOW, QQQ and/or some other ETF.
- Hedge a specific equity in SPY (GS) against its sector ETF (XLF)
Any way to hedge against downside risk in the SnP going long? I'd kinda like to avoid the fees if possible.

Thx in advance for the responses. Keith XD

%%
1] MAINLY study trends/study them a lot......................................................................
2]F0R sure a bigger downmoVe JUL 4th week in SPY \but the main surprise to me it did not happen weeks earlier.
3]QQQ tends to sell off with SPY but doesnt have to it/ it did not JULy 4th.
4]SDS seems to work better for me ,some profits than spxs or spxu, for swing trading; SSO, SPXL,UPRO help better than sds,spxs,spxu// in different time buys.
5]Monthly charts work well in a SPY/QQQ bull market; maybe not so much in MAR\SEPT
6-7] Repeating patterns, monthly charts work well usually in a SPY QQQ bull/market/ sure did JUL4th week. I did not include comissions but did include dividends /when i get them

 

[longandshort]

How would you hedge downside risk for SPY? A couple ideas I have: (all price-normalized):

- Set up pairs for each of the sectors, like T and VZ. Long one, short the other. Pretty much a classic pair trade, but I'm using it as a hedging device.
- Long SPY, short DOW, QQQ and/or some other ETF.
- Hedge a specific equity in SPY (GS) against its sector ETF (XLF)

Any way to hedge against downside risk in the SnP going long? I'd kinda like to avoid the fees if possible.

Thx in advance for the responses. Keith XD

I recommend reading this:
Does the Capital Asset Pricing Model Work? (hbr.org)

 

[2rosy]

How would you hedge downside risk for SPY?

unless your account is many millions, it doesn't make sense to hedge. But if you want to spy options

 

[El OchoCinco]

Just ran a simple test that buys both VXX and SPY at the open and closes at the close.
1 SPY to 0.15 VXX seems to be optimal ratio for that period. Not too bad for hedging considering simplicity.

View attachment 263350
View attachment 263351

PS. VIX on the pictures = VXX

5% return over 11 years? Am I reading that right because that sucks if I read that correctly..

 

[murray t turtle]

I recommend reading this:
Does the Capital Asset Pricing Model Work? (hbr.org)

%%
That study concluded most are not diversified enough.
T Bills = risk free, could be\ before S& P downgraded US/LOL??

 

[longandshort]

%%
That study concluded most are not diversified enough.
T Bills = risk free, could be\ before S& P downgraded US/LOL??

The basic idea is that stock prices are driven primarily by the market factor (e.g. beta to SPX), with the rest being distributed across industry, factor, and idiosyncratic risks.

 

[murray t turtle]

The basic idea is that stock prices are driven primarily by the market factor (e.g. beta to SPX), with the rest being distributed across industry, factor, and idiosyncratic risks.

%%
Another Elite Trader noted he used a stop loss to hedge.
BUY SPY every month or quarter for 40 years tends to work well. One DEC looked like they may sell it hard + they did not ; SPY + UPRO worked well/spy drawdowns much less than UPRO..........

 

[longandshort]

%%
Another Elite Trader noted he used a stop loss to hedge.
BUY SPY every month or quarter for 40 years tends to work well. One DEC looked like they may sell it hard + they did not ; SPY + UPRO worked well/spy drawdowns much less than UPRO..........

Well that's the difference between a hedge and an exit. You hedge when you want to get a cleaner exposure on a trade. You exit when the risk/loss is too great.

 

[KCalhoun]

See SPXS

 

[GotherL]

I got smacked the other day: long on a basket of about 20 equities from different sectors in the SnP, thinking that sector diversity would protect me from any big moves... but they all got away from me together! Grr...

How would you hedge downside risk for SPY? A couple ideas I have: (all price-normalized):

- Set up pairs for each of the sectors, like T and VZ. Long one, short the other. Pretty much a classic pair trade, but I'm using it as a hedging device.
- Long SPY, short DOW, QQQ and/or some other ETF.
- Hedge a specific equity in SPY (GS) against its sector ETF (XLF)

Any way to hedge against downside risk in the SnP going long? I'd kinda like to avoid the fees if possible.

Thx in advance for the responses. Keith XD

The day SPY fell 8 points on open from DIDI takedown? Made 1000% on SPY 430P for my COIN calls. Never imagined for a second it would bank. But I was thinking an unlikely otm put on SPY was better than no hedge. I get screwed way too many times from holding options overnight.