market correction hedge - whats the best option?

jokertrader · Feb 8, 2013

looked at TZA, simple DIA puts, put spreads - any thoughts what people are doing to make say 5k with abt a 10% correction?

how abt a April DIA put spread, selling Calls to fund

what strikes? which is better - dia or spy or some double/triple instrument????

PLEASE ADVICE

i would also be open to option clubs/friends

FrankSlaughtery · Feb 9, 2013

Quote from jokertrader:

looked at TZA, simple DIA puts, put spreads - any thoughts what people are doing to make say 5k with abt a 10% correction?

how abt a April DIA put spread, selling Calls to fund

what strikes? which is better - dia or spy or some double/triple instrument????

PLEASE ADVICE

i would also be open to option clubs/friends

stay away from tza or any double/triple/quadruple, sextuple, etc for anything other than daytrading (and even then you should just trade futures) b/c of the negative compounding effect on price (just goog it).

spreads are tempting b/c they reduce the cost but they also reduce return and are harder to manage.

selling calls to fund puts is again tempting but you have higher margin there too.

strike anywhere from atm to 5% otm using next month expiry.

jokertrader · Feb 11, 2013

what do u think Frank - 5% out April
and if i am ok tying up margin sell calls in march and april???

what about a put spread - say OTM 3% - 7% FOR APRIL?

oldnemesis · Feb 12, 2013

SPY:

buy April 150 put and sell April 152 call for a net debit of $7 per... essentially free.

Bearish Risk Reversal... but you better be right...unless you're long SPY... in which case it's a collar @ zero.

:-)

http://www.optiontradingpedia.com/risk_reversal.htm

FrankSlaughtery · Feb 12, 2013

Quote from jokertrader:

what do u think Frank - 5% out April
and if i am ok tying up margin sell calls in march and april???

what about a put spread - say OTM 3% - 7% FOR APRIL?

both sound good.

2rosy · Feb 12, 2013

backspread or collar

ferrycorsten · Feb 12, 2013

Quote from oldnemesis:

SPY:

buy April 150 put and sell April 152 call for a net debit of $7 per... essentially free.

Bearish Risk Reversal... but you better be right...unless you're long SPY... in which case it's a collar @ zero.

http://www.optiontradingpedia.com/risk_reversal.htm

be careful of bearish risk reversals as they typically have skew working against them...

jokertrader · Feb 25, 2013

finally my 5% OTM SPY march puts starting to work.. wanting some feedback who else is taking what positions?
Should i close this end of the week or keep it open??

cheers

sle · Feb 26, 2013

Quote from FrankSlaughtery:
stay away from tza or any double/triple/quadruple, sextuple, etc for anything other than daytrading (and even then you should just trade futures) b/c of the negative compounding effect on price (just goog it).

Ok, just for entertainment. Let argue... buying call options on levered inverse ETFs is not such a bad idea - levels of the borrow makes them nice and cheap and if there is a large correlated drop, they would do very well.

FrankSlaughtery · Feb 26, 2013

Quote from jokertrader:

finally my 5% OTM SPY march puts starting to work.. wanting some feedback who else is taking what positions?
Should i close this end of the week or keep it open??

cheers

i would at a minimum sell half esp w/ the huge move up yesterday in the vix and w/ the spx near its 50 dma. i think we see a move down to touch it in the next few days then a quick rebound which will crush the vix.