What is the best way to hedge a long SPY position against a future market crash? Going 50/50 on SPY/TLT won't help. SPY puts are expensive. Stop loss orders cause $$$ loss due to head-fakes and flash crashes that recover quickly. Selling covered calls doesn't bring much protection. What are some other ideas?
What is the best way to hedge a long SPY position against a future market crash?
- Thread starter Phill Twist
- Start date
I bought Dec risk reversals: long put in mid 1800's and short calls in the mid 2000s. There is no such thing as a free hedge.
A collar is about the lowest cost (in terms of net debit) protection for a long stock position. The main "cost" is having your long stock called away if the short calls go ITM.
Short ES
have spare cash to buy the dip
if you bought the dip every year since 2009 you're at the top 1% of traders
if you bought the dip every year since 2009 you're at the top 1% of traders
That psychology is much like the one when everyone thought real estate only goes up
yes, a simple asset allocation fund will do that for you. The problem with selling Spy to reduce exposure is depending on where you got in you could be looking at huge cap gains tax. But my all time favorite hedge is cash. But if you don't want to sell any SPY off the top of my head ES sounds like the simplest deal.
we would also need to know something about the investor, like income and age and future plans
I wouldn't do anything until I talked to a CPA and knew exactly what the tax implications are going to be
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Not an easy game plan for collar.
The best case is the price hit your short call and you close with profit.
Ask yourself what you will do if it hit your long put with a loss? Close with profit or roll over to next month?