I haven't heard the term Texas hedge before. It is used in this Barron's article (link).
This is the context...
>> "I am thinking of selling Intel March 20 puts -- and as a hedge, selling an odd lot of the 17.50 puts as well," he said.
The natural question is: Why would someone bet that investors are too afraid and sell say five Intel March 20 puts and hedge with less than five March 17.50 puts? The likely answer is because he's willing to wager big that even if he misses out on the March 20 put trade, he'll make his money back.
"I love the Texas hedge," the trader said, referring to a position that increases risk even though a hedge is supposed to decrease risk.
>>
Market action has been surprising. After spending some time this past weekend looking at charts, I thought more downside stock market action was likely, not a big rally day. I also thought gold was in for more downside. I lucked out on getting in near the bottom on Toyota (TM), though as almost always it is a small bet.
Long TM, GLD, TLT
Net short SPY
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