If you've got a small account, don't hedge it

If you've got a small account, I don't think you should be hedging it.

Hedging is really only worth it when there's a meaningful amount of capital to protect. On a small account, the premium quietly eats a big chunk of what you've got. Honestly, you're better off holding cash and waiting for a setup you actually like.

Once you're into six figures, it flips.

Protecting the capital becomes one of your main priorities. The math on premium spent versus capital protected finally works out.

Even then, don't just blindly buy puts every month.

Buying puts on a schedule with no view is the fastest way to bleed the hedge cost against you. You'll most likely lose money on the hedges over the long run, and worse, you'll stop trusting them right around the time you actually need them.

So you have to find ways to fund the hedges. Risk reversals. Put spreads. Trading around the structure as the market moves.

A simple example.

You've got a risk reversal on. Short a call. Long a put.

The market dumps. Even if you still want the protection and can't yet tell if the dump is done, buying back that short call is not a hard decision. It's cheap now. You bank the premium you sold it for, and you keep the put on for the rest of the move.

If the market bounces afterwards, you sell the call again into that bounce. Same strike, richer premium.

That's how you nick a bit of money off the hedge structure while it's on, and fund the slow bleed that would otherwise be eating your P&L.

How to run a hedge once it's on is part of my framework. When to put it on. How to structure it. How to trade around it so it doesn't quietly eat you.

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