Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
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It looks like the US is somewhat likely to drop a bunker-buster bomb on Iran’s underground nuclear facility. If the market is looking for an excuse to go down another 2-3%, this could be the excuse, if it happens.
I understand the analysis and sentiments but why breaking our principle of “NEVER short the market” here ?
Personally, how often did you short the market before ?
From a momentum perspective, I see this as a winning move, but I share the sentiment. I’m a bit risk averse after the recent crash, but I have a bit of cash to play within a smaller scale.
So we’re not really net short here. We own 88-90% long positions. We’re simply substituting our hedges with a more near-term hedge. So we’re produce leverage on our hedge.
If we did go short, it would be with the previous strategy. And that would be with DITM Put leaps. We were looking at the $600 puts.
But we simply couldn’t make it tenable and we would probably only consider that under a situation where the QQQ took off and produced outlier sized returns. So we’d need to see the qqq up closer to $580-$600 for a play like that.
Here, we’re not so much shorting here but increasing the punch the hedge will have. Rather than buying the June $500 puts, we might buy the August/September $510-$500 put-spread with the same exact capital allocation.
SO that’s basically what’s going on here.
For example, in Arryn, our plan was to buy the June $500 puts with the $25k cash on the sidelines ($240k portoflio value). Now we’re looking to use the $25k to buy a put-spread instead.
The plan is to then close that out in the correction and buy the less leveraged $500 puts thereby giving us a greater hedging advantage overall. Because we’ll produce a greater off-set on the way down being in the August spread than in the June $500’s.
In the smaller portfolio, they go off of a different set of rules and standards. So the smaller portfolios are all short-term in nature. Whatever short-term trade set-up there is we take. That might include near-term short trades.
The rule against shorting the market is about long-term investing. Like putting on a major portfolio-sized short trade against the market.