Should I cut position size on Monday?

Discussion in 'Trading' started by macintash, May 19, 2012.

  1. Should I cut position size on Monday?

    My main strategy has some market exposure, so I have some hedges to keep it market neutral. So far this month it worked well and reuurn has been aver 6% without much volatility. However since it seems market is very volatile, it makes it harder to perdict how good the hedge will hold, so I cut position size by 5% on Friday. The question is if I should become more aggressive on Monday and cut an additional 20 % in size.

    The alternatives are
    -Do nothing since hedge seems to be working.
    -Keep cutting 5% for next few days, as long as market stays in volatile mode.
    -Increase hedges
    -Do nothing now, but monitor positions closely to see if position stays market neutral. If I see a change would start cutting aggressively then.

    Your advice is appriciated.
  2. just curious, how do you make money without any market exposure? If I could figure out how to do that I'm pretty sure I could make enough money to support both you and me and your family. And you sound like a nice safe family man so I'm sure you would like to be supported without any market exposure. So what's it like living in a cacoon?
  3. The point of the thread is not about how to make money with or with out market exposure, I was looking for advice on how to handle position size.
    But to answer your question, there is a lot of long/short strategies that can make money without market exposure.
    (another option is, to keep it in a CD..)
  4. Any smart people here, ready to give advice....
  5. Maybe you should just stay the course until the market provides more confirmation of a shift.
  6. Makes sense, that's the way I'm leaning now. Still I would proably make a small cut in position size (around 5%) on Monday to take profits and move risk of the table.
  7. If you consider the current environment "high volatility", you should probably consider getting out and staying out, because this is nothing.
  8. So your advice is to go out 100%? The dow has fallen 12 of the last 13 trading days, the worst in 40 years. Nothing like August last yr etc, but it could get there quickly.
  9. This is a slow descent, not real volatility. Even August wasn't as bad as it can get.

    Since we don't know the details of your strategy and what you use for hedging and how you came up with your portfolio, it's probably best advice for you to improvise and get a feel for it. I suspect cutting by 5% might work better than other alternatives, since you aren't "sure" and uncertanties shouldn't be black/white, but this depends on how diversified your portfolio is.
  10. You should sell down to the "sleeping point". You clearly do not have enough experience with your hedge under the market conditions you anticipate. Your discomfort is telling you something.
    #10     May 20, 2012