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3 Comments

  1. ANDREW DURRETT
    February 27, 2021 @ 3:23 pm

    It always feel wrong to me to compare the performance of bearish options plays to the long underlying. I’d rather see performance vs shorting the underlying, or buying the inverse etf if available.

    The question this doesn’t answer is – If we want to hedge against SPY would it be better to do it directly or through long puts.

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    • spintwig.com
      February 28, 2021 @ 10:51 pm

      Makes sense. I this scenario the client was seeking to overlay the hedge against long SPY to see the relative degree of inverse movement.

      That is indeed a good question. It depends on what the hedge is allowing one accomplish that can’t be done without it.

      Reply

  2. Strider
    March 3, 2021 @ 8:32 am

    Hello! I’m the client who requested the study. Thanks for the comment Andrew. I think I’ll follow through on your suggestions and compare your ideas to continuous put buying. If I’m right and Spintwig can comment as well, shorting SPY during a crisis would require timing and skill (which I don’t possess!). The returns of shorting SPY continuously….well they’re negative but maybe there is something there.

    IIRC hedge funds run a long short strategy where they position themselves net long stocks but short the index in a 1.3 to 1 ration (the 130/30 fund style). Leveraged inverse ETFs face a continuous headwind of losses due to volatility drag but perhaps they could be used as a hedge if the market has a 3 sigma or greater drop or greater.

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