Quote from sempergumby:
After speaking with several people and garnering alot of feedback, I decided upon a relatively simple hedging formula which isn't perfect, but has worked pretty well for me over the past several months.
hi semper
Good on you to find a good balance for your trading.
So if I understand you correctly, out of say $ 400,000 trading capital, you put $ 300,000 in your stock portfolio and $ 100,000
in QID.
If your portfolio on average makes 25% per year and QID stays the same:
profit unhedged 25% of $ 400,000 = $ 100,000
profit hedged 25% of $ 300,000 = $ 75,000
Your hedging cost is $ 25,000 per year = 6.25%
I hear a far out-of-the-money put is cheaper than that, something like 3%, but then I dont know anything about options.
Other might be able to give an indication.
I wonder why there is no article somewhere that goes into this sort of thing in great detail, so that people can make an informed decision.
If you as in this example want to place an order to buy $ 100,000 worth of QID, how much do you have to have in your account to be able to place this order with your broker?
thanks semper and good trading to you
Options Advice Needed
- Thread starter sempergumby
- Start date
I use the QID for a few of reasons.
1) Its simple.
2) Its liquid - you can buy or sell it at any time.
3) Its an inverse ETF, so you can use it in an IRA.
Again, there are probably more sophicated means for achieving a hedge, but this is the one I employ.
If anyone else can suggest a more efficient strategy, I'd welcome the advice.
Fortunately for me, I'm a pretty good stock picker (on the long side), so this one has worked well for me. But that said, I'm always up for learning something new.
1) Its simple.
2) Its liquid - you can buy or sell it at any time.
3) Its an inverse ETF, so you can use it in an IRA.
Again, there are probably more sophicated means for achieving a hedge, but this is the one I employ.
If anyone else can suggest a more efficient strategy, I'd welcome the advice.
Fortunately for me, I'm a pretty good stock picker (on the long side), so this one has worked well for me. But that said, I'm always up for learning something new.