SPX Hedge Trade #2
Good Friday Insiders,
This market is on fire and there seem to be nonstop buyers. As mentioned in previous updates we are likely in for a peak by the 21st before volatility makes a cameo appearance in the month of January. The more I look at this market, particularly today, the more I am thinking we are in for a sudden surprise.
At the time of this update, the SPX is around 2674. While I loathe holding positions that are heavily delta dependant prior to a long weekend, I will that absence of such a position would potentially be a missed opportunity. This is why we are going out 28 days and are setting our position up for success as soon as we see a 1% decline, my goodness it seems like that is something that will never happen again, until it does!
We are getting long the 2650-2625 put spread. Yes, we are paying up a bit more for wider protection. Note we are buying the SPXPM option series for Feb 15th. SPXPM uses closing values at the end of the trading day on the respective day versus the opening print.
Risk & Reward
We are using $6,900 to place this hedge. For those position sizing, we would look to use 3-5% of a portfolio to place this hedge. We never want to over-commit to position, as anything is possible.