OK ..... I assume below is the post you are referring to. Buying DOTM puts. and/or Short some stocks. But if the "black swan" event never happens your solution could get very costly.
Well, I addressed that point wrt buying DOTM puts. So my better recommendation is to trade market-neutral with longs and shorts. This will hedge a black-swan event and more. My apologies for essentially repeating my previous post.
It still sounds like many posters expect such a black swan hedge to be EV+ or at least neutral. For me, that's not the purpose of a hedge. My strategy normally is EV+, and the hedge (while very likely EV- in itself, and therefore reducing my profits) should guarantee I would be able to continue the normal strategy indefinitely (in theory), and make sure I do not get wiped out by a black swan somewhere along the way. So it seems to me, if you do this, one should accept you'll continually bleed a bit of money and in exchange (again, only theoretically) you will always be able to keep compounding whatever happens.
A case can be made that hedging against a big drop in stocks is unecessary. 2008 was the opportunity for a life time to get rich. For those with some cash and/or bonds plus income coming in, a 2008 style collapse is an great opportunity to get rich and retire
not unless you are in cash b4 the crash. 99% of ppl rode the market all the way down. market timing nearly impossible. no one can do it consistently
Earlier, I posted a basic example hedge trade from a presentation by Don Kaufman of Theotrade. Here is a good critique of that Risk Twist spread trade. "https://www.evernote.com/shard/s2/sh/ac42dd1b-1651-40b1-8117-534aa35b6f1b/1c9f0ee921cd1102". -- There are some opportunities for improvement evidently! ;-)
Excellent work stepandfetchit. I have been looking at portfolio hedging for an SPX/ES option book (for an short premium portfolio) and am coming to the conclusion that either simple long vix call OTM or long puts on /ES or SPX is the only way to go. For protecting against 10% or 20% moves or more. In your opinion what is the best hedge for such a situation?
I am NOT the author of that report, I merely passed it on, as it seems to have legs. I am checking back with the author to see if he will permit disclosing his name here.