Disaster protection?

Discussion in 'Trading' started by drukes1234, Mar 7, 2007.

  1. Let's say you only trade 3-5 times per yr. -- but when you do trade, you put on serious size. You have confidence in your trade but there's always the potential for a Sept.11 type event or a surprise rate cut that just throws everything out of whack. What best protects the downside (or upside if you're short)? Would you just buy puts if you're long futs and buy calls if you're short? Also, for every 10 futures contracts bought how many puts would you buy? What's a good and logical ratio?

  2. I guess the main question is what's the best ratio?

    For every 10 YM futures contracts or 10 ES futures contracts -- how many puts/calls should be purchased?
  3. (1) Reduce your position size from "serious" down to "moderate" and maybe even down to " I'll be able to sleep well over the weekend with my open position". (2) You have to understand and believe that big meltdowns happen at the end of an existing downtrend, i.e. 9-11-2001 and 10-19-1987, not immediately off of new all-time highs. If what happened last week is merely an omen of what's on the horizon, then the market will have to grind even lower before we can get a 10% to 20% blood-letting in one day. We'll see how it plays out.