I have been buying at the money
puts on QQQ and SPY to hedge the out of the money puts. With the gaps
at the open, I find this to be easier than selling more calls. With
each choice there is a cost. Buying puts reduced the potential income
from theta decay.
One positive is that if a decline accelerates, the negative delta from each long put increases. As almost always, it is half a loaf. The overall position is similar to a ratio spread. For a simple example, long one atm put, short 5x puts with 10 delta, for a net near neutral position. Ideal would be a minor decline to the strike of the 5x sold puts.
Markets fall again, now six weeks in a row. My losses are minor, less than 1%. I continue to aim for a slightly positive delta on most underlyings. New positions include CAT DE. One of the TV talking heads suggested buying puts. That’s often a pretty good signal to go long. Summer is almost here. The year seems to be going by very quickly.
One positive is that if a decline accelerates, the negative delta from each long put increases. As almost always, it is half a loaf. The overall position is similar to a ratio spread. For a simple example, long one atm put, short 5x puts with 10 delta, for a net near neutral position. Ideal would be a minor decline to the strike of the 5x sold puts.
Markets fall again, now six weeks in a row. My losses are minor, less than 1%. I continue to aim for a slightly positive delta on most underlyings. New positions include CAT DE. One of the TV talking heads suggested buying puts. That’s often a pretty good signal to go long. Summer is almost here. The year seems to be going by very quickly.
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