61% hedged. And I'm taking it lower.
"Hedge your entire portfolio so you're fully protected."
Sounds responsible. Until you do the math.
A 100% hedge costs money and just recreates a cash position. You're paying fees to sit on the sidelines.
My equity hedge ratio last week was 61%. Yesterday I took it down further. I want to lean long risk because I think the geopolitics fades. But I want to survive if I'm wrong.
Hedge enough that a crash doesn't kill you. Leave enough exposed that a recovery makes you money. And monetize hedges when they're in profit. Don't ride them into expiry hoping for Armageddon.
The hedge ratio isn't static. It moves with regime, with your conviction, with what the vol surface is giving you.
If you've hedged out all the volatility, you've probably also hedged out all the returns.
Ask yourself: am I hedged the right amount for what I think happens next?
Volatility first.
Imran
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