Okay so I am mostly trading and therefore a newbie in investing and especially in hedging. Now I own a small portfolio of longterm holds and do not want to get margin called if they depreciate a bit when markets correct their recent crazyness. So I want to hedge my position during correction phase. My assumption is, that If the SP500 corrects, other markets do as well. Since SP500 mainly consists of AAPL, I plan to short sell AAPL instead of SPY. As I do not know how long the correction may last, put options are not what I want. So my question is in regard of my portfolio - how many AAPL stocks should I short in relation to my portfolio size? Should I focus on excess liq instead? Can I meter the greeks of a stock position somewhere in the IB TWS like I can with options?
To hedge 100 shares of SPY or $34K portfolio size, you’d need to short sell the same $amount of AAPL stock, meaning $34K worth of shares, or 280 AAPL shares to be exact. This would put you close to being delta/gamma/vega neutral. You may realize that this means getting the hell out of the stock market
Generally you don't pick one stock to hedge against the market as a whole, it's usually the other way around. This sounds more like a short on Apple. You don't need to hedge your entire portfolio, you could just take a smaller percentage. But let's say you have 10,000 invested in SPY, you just work out the equivalent $10,000 in Apple. This assumes it moves 1:1 worth the spy, other sectors or stocks you need to check the correlation and volatility.
Well I am mainly into Australian mining stocks not into spy, but I find that, if the spy has a bad day Australian markets have too. At least since the sickness is around. So there is only put options on spy left it seems?
Sell some CALL options. Ie. "covered call". It's equivalent to just selling PUT w/o owning the underlying stock. See also https://en.wikipedia.org/wiki/Covered_call Here you can see the payoff curve https://www.optioncreator.com/stbizkb and also modify the input parameters...
Pretty much, and may work as long as your stocks are going up sufficiently to pay for those puts, before they may crash. Basically it would be a variant of a strangle. Buying puts for a fairly static portfolio would only be an expense. Though consider buying puts on individual and more volatile stocks that you hold. And/or selling covered calls if you can estimate the upside.
%% NO. Several ways to do it. [1] Get off margin in the latter stages of a bull move/bull market. [2] Use Cash/or have a larger cash cushon would be among the best...………………………. [3]Use ETFs [4]Could use leveraged ETFs sometimes/I do that myself sometimes.[Impossible to get a margin call on those.] [5]XLK/tech ETFs/QQQ are more highly correlated to AAPL than SPY.[xlk =24% aapl] IF I did not have my cash qqq to sell last week, I would have made no money/my TQQQ gapped/ moved to quick to preserve my profit. Good question DavidsFaith