Ways to hedge against a heavy loss in extreme situations for a scalper

[maxinger]

hedging is like the ostrich burying it's head in the sand. just take the loss like a man and start over on a clean slate.

you are right mister.

For investors, if stock price is collapsing, they shouldn't be holding on to their dear stock .
then hedge by shorting futures, buying put option, selling call option.


they should reduce their stock quantity, or simply cut loss totally.

 

[murray t turtle]

hedging is like the ostrich burying it's head in the sand. just take the loss like a man and start over on a clean slate.

%%
LOL, true, partly. But any kind of insurance can be wise.If your car is paid for, + my HMC 4 cylinder is; a high deductible insurance policy can be wise . Many states require liability....... A good insurance rule is insure anything you don't want to / or cant afford to replace.

 

[tommcginnis]

Hedges are not always what many think they are like options on the ES. Many forget or don't know the futures' markets were made to be the Hedge of the underlying. Matter of fact, if you have a position of long dividend stocks in February, you could have sold so many ES futures as hedge for your stocks instead of doing the options, then put a hedge on the ES Hedge in case you are wrong.

When the CME goes out, think of what else you can use as a hedge like SPX options, but you need to have in place of "what ifs" and how many to get.

And trading too many...just a matter of time, trading is hard enough for most, then walking the tightrope....

Exactly right, Handle123 --
three kinds of hedges:
1) "Mirror" or negatively-correlated,
2) "Redundant" or positively-correlated,
3) "Disconnected" or non-correlated.

In common usage, people concentrate on mirror hedges -- forgetting about useful redundant(s) or non-correlated(s).

 

[murray t turtle]

you are right mister.

For investors, if stock price is collapsing, they shouldn't be holding on to their dear stock .
then hedge by shorting futures, buying put option, selling call option.


they should reduce their stock quantity, or simply cut loss totally.

%%
Thats one way to do it. Another way to do it, but dont try this @ home as they say; Mr Carl Ichan, instead of putting up a '' hedge fund gate, 2008 ''/ bear. He let his investors out by taking the money from another account + NOT selling stocks. Wise move ; i would rather do that with ETFs.LOL+true. By the way he cut loss on CHK, so thats not a mindless rule also.LOL

 

[maxinger]

Hedging is for newbies who try to be professional.

Hedging is for professional who want to sound professional and almighty.


This is my opinion.
I don't hedge because I disagree with the concept.
But do hedge if you want to.


-------------------------

 

[TickSeeker]

...
If I would loose control over a position during a heavy move, it could mean serious trouble for me. Loosing control could happen by loosing connection to the exchange, for whatever reason, be it my power supply, my internet connection, problems at broker/ FCM or problems at the exchange.

So far I tried to minimise the risk by the following means:
- having several internet connections through different providers, both fiber and mobile
- having several phones ready in case I can only get through to my FCM by phone
- Uninterruptible Power Supply (UPS)
- several trading computers, including a notebook that can run on battery
- backup account with other FCM and other datafeed provider

I would add for your list the order types which are native to the exchange. This means when you put stoploss order in it goes directly to the exchange books and sits there. In the case of emergency this will cover every possible situations except the vanished bids and offers.

Now you can have a computer or connection malfunction or broker's server can crash etc.

 

[CALLumbus]

I would add for your list the order types which are native to the exchange. This means when you put stoploss order in it goes directly to the exchange books and sits there. In the case of emergency this will cover every possible situations except the vanished bids and offers.

Now you can have a computer or connection malfunction or broker's server can crash etc.

A good point, thank you for your input !

 

[TickSeeker]

A good point, thank you for your input !

For the vanished bid and offers use LLC and broker who require no personal guarantees.

 

[ElectricSavant]

Call,

You have done what you can do with all of the redundencies in place.

What I do is to always remove half of my profits each day or week and let the rest ride. Spending the money along the way is your only hedge.

Sure you can save up an emergency fund. You can invest in vehicles that are insulated against catastrophic world events. Buy art and collectibles might be a thought. Somehow you will need to segregate funds along your profitable journey in Futures Scalping. ...but again spending the money is your only hedge.

ES

P.S. don't forget to pay yourself labor from your Futures trading. I use $35.00/Hr.

Hi,

I scalp very shortterm in the main index futures (FDAX, FESX, NQ, ES). Since I go for pretty small scalps, my position size usually gets somewhat large, relative to my account size.

If I would loose control over a position during a heavy move, it could mean serious trouble for me. Loosing control could happen by loosing connection to the exchange, for whatever reason, be it my power supply, my internet connection, problems at broker/ FCM or problems at the exchange.

So far I tried to minimise the risk by the following means:
- having several internet connections through different providers, both fiber and mobile
- having several phones ready in case I can only get through to my FCM by phone
- Uninterruptible Power Supply (UPS)
- several trading computers, including a notebook that can run on battery
- backup account with other FCM and other datafeed provider

I think the technical side I have covered pretty good, dont know what could go wrong there from my side.

The big question for me is if it is a good/ best way to possibly hedge a position on your main account with a backup account at another FCM.
Problem is if there is something happening at the exchange, a blackout, then even the other FCM wont be able to help me, I wont be able to reach the exchange and therefore wont be able to open a hedging position.
And if some real shit like 9/11 or flash crash happens, I could end up getting fuXXed on both accounts, the main one and the backup account, because of some extreme volatility.

So how do you other shortterm traders, scalpers handle this problem ? I was thinking about using an options trading account as backup, instead of the backup futures trading account. Advantage would be: might have access to hedging instruments (even OTC), even if my futures market has a blackout. Another advantage is that the position on the backup options account could not get completly fuXXed by some extreme volatility in a crazy jumpy market.
The disadvantages I see with an options account for backup up is: not sure if I will be really able to set up a hedge that covers all or most of my risk, especially in extreme market environments. And the other disadvantage: buying options seems pretty expensive, if I want to hedge most of the risk in a large futures position, I would need a pretty big options trading account.

Another possible way to limit my risk if something goes completly wrong one day would be to open a corporate account instead of an individual account. Doing that the trading account could be arranged in a way that losses are limited to the capital of the corporation/ LLC. So far I tried to avoid going this way because of the stupid overregulation and bureaucracy for entrepreneurs here in Europe.

Would be great to hear how other traders handle these risks, maybe you have some good ideas for what I could do.

Greetings,
CALLumbus