If you hold overnight positions/swing trade, how do you hedge against gaps up/down?

Discussion in 'Trading' started by Nutinsider, Oct 20, 2012.

  1. Visaria

    Visaria

    Not true.
     
    #11     Oct 22, 2012
  2. kroponer

    kroponer


    Well, what happened? Slippage on your stop?
     
    #12     Oct 22, 2012
  3. Visaria

    Visaria

    No, i was fortunate in that i had a tight stop and was taken out after the first plane hit. The market, after stopping me out actually went back up a bit and then suddenly smashed down after the 2nd plane hit.

    If i had a larger stop in that particular case, i would have had huge slippage, or may even been locked out when the markets were closed down.
     
    #13     Oct 22, 2012
  4. ok, another brilliant reply from you

    that makes about ten where all you post is "not true"

    who are the traders making a living full time that do not need and use margin?
     
    #14     Oct 22, 2012
  5. Guys - options are the classic instrument for hedging. However, that does NOT mean they are cheap....you'll have to pay a price for the hedge.

    For instance, Copper has been moving fairly well recently, but margins are about 5500. And you get a margin call if you are down only 7 cents which is only about one-third of the limit move.
    So going into the weekend, if you are long, you'd place a market order for the at-the-money copper PUT contract for the current expiration month. (Use CALLS for short positions in the futures).

    WIth the above hedge, a limit move has little to no impact on your overall position balance.
     
    #15     Oct 22, 2012
  6. long dotm puts.
     
    #16     Oct 22, 2012
  7. very expensive over the long haul

    for the few times they save your ass, you probably over the course of a year only break even

    that is, you would be better off just taking the hit

    like I said, 50% of the times these gaps go in your favor

    I'm not in love with my positions, I can just close them out and get flat for very little cost, commissions aren't too bad, spread can be a little rough
     
    #17     Oct 22, 2012
  8. Have any stats or account statements that prove that statement ?
    dotm puts are cheap, but offer only some protection.
    ATM puts are expensive, but offer full protection.
    Options are flexible in that regard....pick your risk level.
     
    #18     Oct 22, 2012
  9. no, only anecdotal

    would be interesting to see the difference between options and just getting flat on the close

    just because you are flat doesn't mean you aren't swinging, you can put it right back on on the open
     
    #19     Oct 22, 2012
  10. Visaria

    Visaria

    Not true. :D
     
    #20     Oct 22, 2012