*THE* Market Trendline To Watch

١٧ ديسمبر ٢٠٢٠

If you're anything like me, then recently you've had a great deal of trepidation about buying U.S. equities with the indices at all time highs - and for good reason. Concerns about overvaluation, fiscal spending, and overcooked sentiment have cast shade on an otherwise resoundingly bullish technical reading for the markets, and purchasing stock has become an exercise in anxiety. Personally, as a primarily long theta trader, I have a good deal (>60%) of my portfolio being liquidated tomorrow for max profit, and I've been struggling to figure out how to deploy it into the markets while maintaining a favorable risk / reward profile.

The solution, I have come to find, is simple - a solid, resolute trendline which will determine the amount of hedging I will be doing into the future. As long as prices stay above this trendline, then I'll remain unhedged and long (a win for my general strategy), but should the trendline be breached, then I'll begin to hedge my net SPX deltas with spy puts to cancel out any net long positioning. Further market pain or a pullback won't affect my P/L, and my highly levered portfolio can live to fight another day. I'd recommend plotting out this trend on your own charts as a means of controlling risk.

Cheers!

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