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

CALLumbus said:
Yes, I see your point. A longterm trend follower would probably not have been trapped, or even if he would have been trapped he maybe would have not cared that much about it. But for a longterm trendfollower the risk that I discuss here, the risk of a highly leveraged scalper, is not really relevant. He would maybe have had a short position of 2 to 5 emini futures and just have surfed down the wave. A shortterm scalper like me, with the same risk capital of that longterm trader, would have maybe scalped on that day, several times a day, both long and short (who cares about the longterm trend as a scalper :cool:) with a clip size of something like 50 emini futures contracts. And thats the difference: if the longterm trader gets stuck in his position, for whatever reason, he has a much smaller position on than the scalper/ shortterm trader and therefore much less risk. It is just a completly different world.
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Good points, CALLumbus.
[a] Insurance question ; bigger deductable =cheaper premium.Self insure is a good goal.
I'm sure you know more about 5 minute charts..... than me; you say''who cares about long term trend as a scalper?'' Are you saying you trade a bear market, same as a bull market as a scalper????? I dont believe that[ I could be wrong, on that LOL]

[g] I see, + its quite relevant, CaLLumbus ,your guts are bothering you on your position size; by the way we have been in war since before 911/attack .Interesting; your [or any] subconscious mind never forgets anything.......

Study of insurance contracts could help you/risk help; State Farm[#1 auto insure] make$ money on premiums, makes money on thier stocks, makes money on bonds..........I know Don Bright+ his DayTrading Co made money, on stocks ;dont know how many of his daytraders made money. Good question
 
Every hedge comes with a cost. Options don't always move in step with the future or in same increments. So exit is the best option, unless you know the stoploss the market is actually honoring despite the big jump (or fall). Case in point is trades initiated or completed through a big jump/fall at crude oil inventory report release.

You may consider exchange colocation to boost up your technical infra.
 
I been long term trader thirteen years longer than a scalper, so I learned first how to prepare for the inevitable and 911 in some fashion will happen again. Some have disagreed with me before, but scalping has always been greatest risk than all the long term positions put together as there is no clear way to cover my rump. In long term I hedge everything to where from the beginnings I am more than hedged to 100%, people forget it is not one to one till expiration date, so to get one to one I have to take formula to have so many options to position size. And I have found a number of ways where the insurance costs me almost nil.

But in scalping and I take 60 plus trades a day in ES alone, it be impossible to get off option trades and where I am averaging down on all scalps in so many markets have lost track. I have come to realization, I will experience some loss but not entirely by another 911 to a tune of $3000 per lot, so for one I use a self margin of $3000. And I continuously keep open Put options OTM to possible give me some relief, they always expire worthless, but it is a cost of doing business and some form of insurance, but they won't offer me no loss, but what it will do is offer me a way to keep the account open. Also, I set a goal each year of how much am seeking for each month, and they are based on Put options as there is limited partial ways to cover the costs of the insurance. When goal is reached, end of the month any excess transferred to long term side even though scalping percentages are always much higher than what I can get long term.

I switched my thinking in 2010 to Hedging first and getting in really don't matter, it is nice to get in low, but tests have proven to me it don't matter in how I am trading any more long term, I am not going to sell off any long stocks unless the dividends get too low, I see fundamental reasons to get out or trend has reversed strongly to down. Since the number of Indexes are shorted more than cover long stocks, to a degree it is additional insurance in case of short side damage to scalping.

Where I live, T-1 connected much more reliable than cable and automation is on severs either near exchanges or within mile of them, two other brokers for standby, generators back up power, sea of batteries, solar power, Satellite phone, so am ready for bear.
 
birdman said:
You could only trade short. You lose half your opportunities, but you don't worry about the next 911.
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I agree;
partly,, since most of the trends were down then , as GE is now.I did NOT mind paying the dividend for selling[short] DAL/bankrupt; but during an uptreNdning bull market i would rather collect dividends, on a super strong uptrender.With 3 times leveraged ETFS; dont have to pay any dividends; not a sector or stock tip.:cool::cool:
 
CALLumbus said:
I think yesterday's CME outage shows how important and relevant the topic of this thread was and is. Think in advance and be prepared for all the crazy situations you can think of. Then you will have less worries when it actually happens.
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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....
 
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