Best way to hedge the US equities market overnight?

Discussion in 'Trading' started by HotTip, Aug 15, 2007.

  1. HotTip


    I trade US equities and my system requires that I hold positions overnight until the following close. Most of the time I'm internally hedged because I have a relatively even mix of longs and shorts. But, occasionally I find myself heavy long or heavy short, and I'm trying to find the best way to hedge overnight in the event that the market goes in the opposite direction the next day and takes all of my positions with it. I thought maybe SPY options, but then I discovered S&P mini futures options, which look like potentially a cheaper way to hedge while having the same liquidity as SPY options.

    Anyone have any thoughts on this approach to hedging, and which of the above approaches would work better, or if there's a better way? Also, with respect to Index futures options, is one contract just for one option (as opposed to one contract=100 options for equities), and do I value it per tick as the underlying futures (i.e., an increase of one point in the ES option = $20)?

    Thanks for all of your help!