I hope you found this video helpful in knowing how to hedge against a falling market, or a market crash. If you have any questions, let me know down in the comments and I'll see you on the next one. Recommended Links & Videos: My Trading Routine: go.rockwelltrading.com/my-trading-routine Wheel Strategy Playlist: ruclips.net/p/PLBa3sAx-Io2nosgosERUhIZwzvIgD-3Vq PowerX Strategy Playlist: ruclips.net/p/PLBa3sAx-Io2l9ZV4s66J-uNkG6AJvhSPB
Dear Markus thank you very for your explication!!! About the leverage inverse need to create a spread option? Or only need to buy individual symbol to protect the portafolio? Ex: *2dxd-3*sdow or buy direct dxd maybe with stop loss? Thank you again
The other downside is maintenance and reset costs are pretty high with inverse ETFs....plus, as you said, these are only for short term. If you have longterm hedge plans, then buying Puts is the correct thing to do, BUT you have to do some forethought. If we take SPY for an example and say we have an average growth of 15% per year and currently sitting on 432.17, then we can have a price target of 508.43 in 1 year and 598.15 in 2 years, giving us a difference of 89.72. We can take the 2024Jan 510P for $9500 to protect $43217....but wait....this is just the initial costs. The plan is that you'll want your 2 year target to hit ATM as close as you can in 1 year in order to maximize the amount you get back in the sale on extrinsic valuation when pushing further up, this reduces your "carry cost." So if we assumed 508.43 in 1 year, by the time 1 year is up, we will have 1 year left on our Put option but be ATM or near it (hopefully).....when we sell the option and push it up by our assumed 2 year price to 600 at a new 2 year mark, then we will only have to pay $6600. This means our average is actually $6900 per year for the first 10 years, which is 15.9% of utility, so a "loss" of 0.9% of perceived valuation per year in a "perfect hedge"....but it's better than any of the methods provided in this video, which means you only have to figure out a way to come up with about $400 per year to "break even" (selling CC or PMCP can get you that money, just know that as long as you are doing PMCP you are not protected anymore, so keep it really brief). You don't have to hedge the whole thing....for the market to lose 50% in a shot means a global event catastrophe that either ends up with a swift recovery because of government policies OR money is meaningless and therefore markets are useless. This means that you could actually buy a Put spread for the 2 year plan and roll it instead, the 510/215 costs $8600 ($900 cheaper) on initial and the rolling would cost around $5900 ($700 cheaper), placing your 10 year per year average at $6200, a 14.3% utility, so a gain of 0.7% on perceived growth. There are a couple other setups that I could do that would be much better, but to be honest, hedging is just dumb, in my opinion, unless it is a guaranteed profit situation. Like if you had a $5 bet on the all-tall-small bet on craps and you had all the numbers except the 6 and 8 to roll, then laying against them at half the distance guarantees the profit.....or if you had a $30 don't pass and a 6 rolls but you're not sure you'll 7 out so you can place the 6 for 25 and guarantee a $5 profit no matter what. Notice these are gambling setups because that's what hedging is for, to turn a gamble into a sure win. Stocks are not a gamble, for the most part, they are supposed to be about owning a part of a business and earning money (through dividends and/or CCs) in the meantime. Yes, they can go down, and they can also come back up....because the population continues to increase, more people will require more products and services, more money printed, more inflation required, more value in all objects....therefore stocks can only go up in the long run on average. This is why we see so many years (almost like 17 average) of bull territory over a short 18 month average bear territory when it happens....why spend so much time gambling on something that happens 9% of the time, that's silly. If the market truly fails, then you still own parts of the company, it doesn't matter if you are selling those notes for bitcoin or seashells, they will be worth quite a bit in whatever currency we switch to.
Hi Markus Just watched your video on hedging, lively job. So question I have is: How do you take the hedge off at B/E once it triggers. Sounds like a silly question until we dig a bit deeper Let’s say it’s set to trigger at price of 4500 and it touches, activates then returns back up, as markets do. If you take it off at a small loss there’s a change that many times price will come back hit return 4500 and so on. This may happen many times as the market moves Each closing out of the hedge is a small loss, these losses can add up Do you just accept that Is there a trick? How do I take off a hedge properly? Thank you very much
The fourth option is to sell calls. Sell DOW Or S&P Or NASDAQ calls as per your portfolio. We can also take call credit spread. I think this the best possible way.
Well.... you would have to sell A LOT of calls on the indices to hedge your portfolio. And you are limiting the upside potential. What if the markets don't crash and instead rally? Then you're not participating in this rally. Just my 2 cents.
Puts on QQQ for the next few weeks? Lost a pile of $$$ on my EV long like NIO and PLUG. What are your thoughts on SOFI. I have a small position but down almost 40%
The only way is to not invest all your money and just wait when you are under water with your shares. The other ways are expensive and don't make sense, because if you don't want risk you don't invest.
But here is the problem, it's almost impossible to time the market and often when you think a correction is coming, the market goes higher. So, should you keep a constant hedge on your account at all times?
Then stop guessing, use a tool that can help you with the guesswork. Markus do not trade stocks that is not recommended by the PowerX Optimizer. Learn more about this, reach out to our social channel facebook.com/markusheitkoetter
I hope you found this video helpful in knowing how to hedge against a falling market, or a market crash. If you have any questions, let me know down in the comments and I'll see you on the next one.
Recommended Links & Videos:
My Trading Routine: go.rockwelltrading.com/my-trading-routine
Wheel Strategy Playlist: ruclips.net/p/PLBa3sAx-Io2nosgosERUhIZwzvIgD-3Vq
PowerX Strategy Playlist: ruclips.net/p/PLBa3sAx-Io2l9ZV4s66J-uNkG6AJvhSPB
Dear Markus thank you very for your explication!!! About the leverage inverse need to create a spread option? Or only need to buy individual symbol to protect the portafolio?
Ex: *2dxd-3*sdow
or buy direct dxd maybe with stop loss?
Thank you again
The other downside is maintenance and reset costs are pretty high with inverse ETFs....plus, as you said, these are only for short term.
If you have longterm hedge plans, then buying Puts is the correct thing to do, BUT you have to do some forethought. If we take SPY for an example and say we have an average growth of 15% per year and currently sitting on 432.17, then we can have a price target of 508.43 in 1 year and 598.15 in 2 years, giving us a difference of 89.72. We can take the 2024Jan 510P for $9500 to protect $43217....but wait....this is just the initial costs. The plan is that you'll want your 2 year target to hit ATM as close as you can in 1 year in order to maximize the amount you get back in the sale on extrinsic valuation when pushing further up, this reduces your "carry cost." So if we assumed 508.43 in 1 year, by the time 1 year is up, we will have 1 year left on our Put option but be ATM or near it (hopefully).....when we sell the option and push it up by our assumed 2 year price to 600 at a new 2 year mark, then we will only have to pay $6600. This means our average is actually $6900 per year for the first 10 years, which is 15.9% of utility, so a "loss" of 0.9% of perceived valuation per year in a "perfect hedge"....but it's better than any of the methods provided in this video, which means you only have to figure out a way to come up with about $400 per year to "break even" (selling CC or PMCP can get you that money, just know that as long as you are doing PMCP you are not protected anymore, so keep it really brief).
You don't have to hedge the whole thing....for the market to lose 50% in a shot means a global event catastrophe that either ends up with a swift recovery because of government policies OR money is meaningless and therefore markets are useless. This means that you could actually buy a Put spread for the 2 year plan and roll it instead, the 510/215 costs $8600 ($900 cheaper) on initial and the rolling would cost around $5900 ($700 cheaper), placing your 10 year per year average at $6200, a 14.3% utility, so a gain of 0.7% on perceived growth.
There are a couple other setups that I could do that would be much better, but to be honest, hedging is just dumb, in my opinion, unless it is a guaranteed profit situation. Like if you had a $5 bet on the all-tall-small bet on craps and you had all the numbers except the 6 and 8 to roll, then laying against them at half the distance guarantees the profit.....or if you had a $30 don't pass and a 6 rolls but you're not sure you'll 7 out so you can place the 6 for 25 and guarantee a $5 profit no matter what. Notice these are gambling setups because that's what hedging is for, to turn a gamble into a sure win.
Stocks are not a gamble, for the most part, they are supposed to be about owning a part of a business and earning money (through dividends and/or CCs) in the meantime. Yes, they can go down, and they can also come back up....because the population continues to increase, more people will require more products and services, more money printed, more inflation required, more value in all objects....therefore stocks can only go up in the long run on average. This is why we see so many years (almost like 17 average) of bull territory over a short 18 month average bear territory when it happens....why spend so much time gambling on something that happens 9% of the time, that's silly. If the market truly fails, then you still own parts of the company, it doesn't matter if you are selling those notes for bitcoin or seashells, they will be worth quite a bit in whatever currency we switch to.
Excellent explanation Mark and. Marcus. 👍👏
Awesome! Thank you for watching! :)
Thanks a lot. Your explanations are very illustrative!
😊 You are welcome! I am glad that this helps!
Hi Markus
Just watched your video on hedging, lively job. So question I have is:
How do you take the hedge off at B/E once it triggers.
Sounds like a silly question until we dig a bit deeper
Let’s say it’s set to trigger at price of 4500 and it touches, activates then returns back up, as markets do.
If you take it off at a small loss there’s a change that many times price will come back hit return 4500 and so on.
This may happen many times as the market moves
Each closing out of the hedge is a small loss, these losses can add up
Do you just accept that
Is there a trick?
How do I take off a hedge properly?
Thank you very much
The fourth option is to sell calls. Sell DOW Or S&P Or NASDAQ calls as per your portfolio. We can also take call credit spread. I think this the best possible way.
Well.... you would have to sell A LOT of calls on the indices to hedge your portfolio. And you are limiting the upside potential. What if the markets don't crash and instead rally? Then you're not participating in this rally. Just my 2 cents.
Puts on QQQ for the next few weeks? Lost a pile of $$$ on my EV long like NIO and PLUG. What are your thoughts on SOFI. I have a small position but down almost 40%
What about buying a debit spread to hedge your portfolio. Debit spreads much cheaper than long puts.
Yes, but then you are not really hedged because you are BUYING a put and SELLING a put. Because of that you only have a hedge to a certain level.
What market ETF has weekly I tried vanguard it has only monthly
Hi Edwin, here's the full list:
www.cboe.com/available_weeklys/
Does this help?
What about the decay on leveraged ETFs? I was always told its not good to hold them for a swing position cause of the decay
Yes, that is correct. I would only use it as a short-term hedge for a few weeks.
What about selling puts on the 3x leverage inverse ETF as hedge?
That's trouble because when you get assigned, you now own a 3x leveraged ETF. And that's a wild animal!
@@rockwelltradingservices but your hedge is to outright buy a 3x leverage inverse ETF, how is that better?
The only way is to not invest all your money and just wait when you are under water with your shares. The other ways are expensive and don't make sense, because if you don't want risk you don't invest.
But here is the problem, it's almost impossible to time the market and often when you think a correction is coming, the market goes higher. So, should you keep a constant hedge on your account at all times?
Then stop guessing, use a tool that can help you with the guesswork. Markus do not trade stocks that is not recommended by the PowerX Optimizer. Learn more about this, reach out to our social channel facebook.com/markusheitkoetter
You will lose money constantly if you buy and hold one of the inverse ETF's. I would not advise them for anyone that is not doing day trading.
I think they are ok as a hedge for a few weeks or a couple of months. But you're right: I wouldn't use them as a long-term hedge.
Repeat.