Limiting position risk w/o stops

T

TraderD

I am brainstorming ideas on limiting position risk in index futures w/o using
stops. Why w/o stops? During dramatic event stops may not always work. I would like to limit positions risk to 10%. Here is what I have come up with so far:

1) trade short only, due to directional bias in stock market
2) offset long positions with options (strike ~ -10%?)... this will carry high
transaction cost (I trade once a day on average)... also, option position
will probably not offset the loss completely...
3)?

Any thoughts/past experiences?
 
I would consider hedging in a correlated instrument. For instance OEF vs SP, etc... 1 OEF point is roughly equal to 20.43 SP points.
 
Quote from ktm:

I would consider hedging in a correlated instrument. For instance OEF vs SP, etc... 1 OEF point is roughly equal to 20.43 SP points.
More...

Yes, of course. My question pertained to practicality of such strategy, caveats etc.
 
If you are looking at the 2% case where a stop would not work, then the solution should be setup accordingly.

i.e. If a stop limit with a huge limit will not work, then consider an option position at that huge limit, which should be close to out of the money.

I would not get too extreme in practice, but the brainstorming phase can be...
 
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