The cost of hedging
- Thread starter qlai
- Start date
"The way they wrote this, it is true, the time decay will eat you up. But by doing intermittent Hedging and knowledge of charts, it becomes one's edge of many."
That and depending on the cost of the hedge. For the S&P500 - if VIX is high and you still want a position, consider selling puts or covered call (not really a pure hedge, but the premium will at least partially offset a drop). If VIX is low and you want a position, then it's cheap to buy puts.
That and depending on the cost of the hedge. For the S&P500 - if VIX is high and you still want a position, consider selling puts or covered call (not really a pure hedge, but the premium will at least partially offset a drop). If VIX is low and you want a position, then it's cheap to buy puts.
The key for me is to finance my hedge. If I’m buying puts, then I’m selling something to pay for the protection. I prefer “free” hedges and I often obtain my hedges for a profit. I walk a fine line, but I’m comfortable at such heights.
Hedging is absolutely essential. Saved my a$$ so many times. Without hedging, I would be bankrupt long time ago. LOL The time decay is only when the hedging is not needed anymore. When you are really losing and hedging is really needed, the delta and the gamma would make up more than enough for the time decay and time decay would be almost non-existent. The key to the success in hedging though, however, is dependent on your execution. The quality of execution is what makes the difference in how much loss you can salvage and even whether you can turn a loss into a gain.