News release strategy/ (watching charts with eyeballs is not necessarily a hedge...)

schizo said:
Either I'm stupid or you make no sense. Hedge is, by definition, an "insurance". Say you're hedged against your position (eg. covered call/put). Now suppose the market went in your position. In that case, your underlying is up but your hedge is down by equal amount. So you're net flat. On the other hand, if the market went against you, your underlying is down but the hedge is up. Again, you're net flat. So my question is what's the point? Also on a volatile day like today, you're looking at a hefty options premium.
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Just because something is hedged doesn't mean it has to equal zero. It can be so that it just limits your losses (and gains, unfortunately).

If options prices increase due to volatility, then wouldn't that cancel out because you're selling one and buying one if you're holding a spread?
 
farmerjohn1324 said:
Just because something is hedged doesn't mean it has to equal zero. It can be so that it just limits your losses (and gains, unfortunately).

If options prices increase due to volatility, then wouldn't that cancel out because you're selling one and buying one if you're holding a spread?
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Man, go learn some options basics first.
 
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