Best Way to Hedge GE

Discussion in 'Stocks' started by trader345, Jan 21, 2011.

  1. Any idea as to best way to hedge GE exposure? Don't want to use options because of time decay. Was thinking of buying some SDS. I know there is some tracking error but that occurs more over the long-term, correct? I especially want to hedge exposure over this weekend since GE just had a pop.
  2. You can compare the tracking error to the theta decay over your intended time frame and make a determination on which is the least costly hedge. SDS also has 'time-decay' due to leverage. Without any analysis, my guess would be that an option would be a better hedge, that's just my 2 cents though.

    A more precise hedge could be a SSF (if they are available for GE, I'm assuming yes) or a synthetic option position to replicate an opposing GE position (but then why not just temporarily reduce exposure - same result).
  3. The risk-reversal. Buy the 19P funded by the short 21C. Minimal decay. CC upside, downside free put. maybe ratio it 3/5 favoring calls to trade it at no outlay. Or go 18/21.

  4. dont think ben and bama is hedge enough?....