S&P - Time to Hedge SPY

١٢ يوليو ٢٠١٩

The Trade

SPY and other index ETFs are putting in rising wedge patterns, as seen in the chart, every rising wedge has been met with a subsequent mean reversion at least, or more substantive drop at worst (i.e. the drop in May). So it is time to hedge your positions accordingly, both to protect and profit from the drop that looks set to come in the next week or so. Personally i will be using Put options on SPY.

Fundamentals:

The stock market got what it wanted, at least for now, Jerome Powell has signaled to congress that rate cuts are a go, the stock market has enjoyed quite the rally over the past few weeks, with new high after new high being taken out on major indices.

With that in mind, it is time to hedge, my inclination is that markets have been rallying in part, due to them pricing in the prospects for a rate cut, with TLT dropping over 1% last night, it is only a matter of time until SPY follows suit.

So, now is the time to hedge your market long positions, either with options or buy purchasing an inverse ETF.

In the case of the SP-500, the inverse SH is suitable.

٢١ يوليو ٢٠١٩

تم فتح الصفقة

The SPY hedge is playing out quite nicely, although we have not pulled back greatly, the hedge is doing it's job.

٢٣ يوليو ٢٠١٩

تم فتح الصفقة

With big earnings announcements (AAPL, AMZN, FB amongst others) within the coming days, it is worth holding this hedge through those announcements, the FOMC meeting at the end of July is also something worth considering, whether you want to hold through.

Given rate cuts are all but baked into the cake at this point, be cautious of holding market short positions through this announcement.

٣ أغسطس ٢٠١٩

تم فتح الصفقة

For those who are hedged, hope you are enjoying that extra sleep at night, for those who are not hedged, learn from this and implement it in the future.

٥ أغسطس ٢٠١٩

تم فتح الصفقة

This hedge has worked beautifully, feel free to take some money off the table at this conjuncture.