Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Buying puts as a hedge or even covered call writing tends to just cost you money overtime
You don't necessarily have to buy puts. You can purchase calls in other vehicles or you could sell calls as well.
Of course, if you look at from this perspective, it's no different than purchasing insurance; however, you're right that people won't make the same rate of return as those that are investing without insurance.
At the same time, using this strategy, you will still lose money in a drawdown, but not nearly as much as if you weren't insured.
Isn't the simplest route, to buy into bear index funds? These are supposed to go inversely with the direction of their underlying index.
Quote:
Originally Posted by BeerGeek40
I've been waiting for a downturn for a long time, but it just doesn't seem to be happening. I used to own HDGE, probably had it for 2 years, but it did nothing for me other than lose value.
You'll eventually be right. No, I don't mean this facetiously, or to provoke a fight, or to sound like some venerable dispenser of wisdom. I do however wonder: (1) how much further loss would one sustain, before eventually one's forecast comes to fruition? And even more importantly, (2) how does one figure out when to switch from a short-position to a long-position, once the coming storm has eventually passed?
In other words, the risk is that one becomes pessimistic too soon, but then, that one stays pessimistic for too long.
Isn't the simplest route, to buy into bear index funds? These are supposed to go inversely with the direction of their underlying index.
You'll eventually be right. No, I don't mean this facetiously, or to provoke a fight, or to sound like some venerable dispenser of wisdom. I do however wonder: (1) how much further loss would one sustain, before eventually one's forecast comes to fruition? And even more importantly, (2) how does one figure out when to switch from a short-position to a long-position, once the coming storm has eventually passed?
In other words, the risk is that one becomes pessimistic too soon, but then, that one stays pessimistic for too long.
The problem with investing in inverse funds is that they decay overtime.
You don't necessarily have to buy puts. You can purchase calls in other vehicles or you could sell calls as well.
Of course, if you look at from this perspective, it's no different than purchasing insurance; however, you're right that people won't make the same rate of return as those that are investing without insurance.
At the same time, using this strategy, you will still lose money in a drawdown, but not nearly as much as if you weren't insured.
It really doesn't matter which combo you go with in the options market you are most likely losing long term not only the cost associated with the options or lost appreciation of the underlying security but also transaction costs
I've been waiting for a downturn for a long time, but it just doesn't seem to be happening. I used to own HDGE, probably had it for 2 years, but it did nothing for me other than lose value.
Agree with the above poster who said that the trend is your friend.
There hasn't even been a proper market correction in more than one and half years. And it's been 8+ years since an actual nosedive.
So yeah, you have to sit around and wait a long while for those shorting opportunities. And that's if you can manage to catch them while they're happening. They often happen quickly when they do.
The problem with investing in inverse funds is that they decay overtime.
With a single inverse it isn't really an issue but in the multiples more so when they rebalance daily you run into issues. Time decay hits options just the same
Whatever, just don't sell calls, you could get in real trouble with a runaway stock market. Buying puts is less trouble, but you lose the premium overtime.
What are some suggestions on how to benefit from a downturn?
Inverse ETF's go up when the market goes down. But here's the key.... Nobody knows when the next correction will occur. And nobody knows if a decline of [pick any percentage] will lead to even more decline, despite the nonsense that you hear on the radio from people like Ken Moraif and Online Trading Academy. Betting on a market downturn is gambling at very poor odds.
Instead just stay invested at all times and be diversified into bonds and stocks, then you are not concerned with the next stock crash.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
