Your hedge is bleeding you dry
Buying puts every month to hedge your portfolio is a guaranteed way to bleed money.
Most puts expire worthless. So why would repeatedly buying things that expire worthless be a winning strategy?
There are better ways to protect capital.
Risk reversals. Sell a call to fund your put. Market dumps? Buy the call back cheap. Market bounces? Resell the call and pocket the difference. You've just funded your protection and made money on the round trip. You just need to be comfortable losing some exposure on a sharp rally.
Put spreads or put flies instead of outright puts. Same directional protection, fraction of the cost. Sure, the protection is capped. But how often does the market really drop 10% in a straight line? Pick your poison: fast decay or capped protection.
And the big one: trade around your hedges. When a hedge pays off, monetize part of it and roll into a new position. Don't sit there watching it decay back to zero.
I had SPX 20Mar put spreads on last week. Restructured them on Friday. Still have solid protection if we keep dropping, but I don't give it all back on a squeeze to 6800.
Hedging is a dynamic process. Entries, exits, adjustments. The people who just slap on puts every month are funding someone else's P&L.
Volatility first.
Imran
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