My God is this guy crazy? Took out a loan on his house and bougt AAPL + CFC? I'm sorry but this guy is seriously nuts. I pray for him to make it out of this okay but he was asking for it!
idon't agree and i didn't throw any crap(yet). if you are wrong-you wrong. bend over, take it like a man and move on..even if you "hedge" yourself with something like YM against SP(when it's not in your plan from the beginning) the correlation will disappear at this exact moment. and what do you do with this box anyway? ok, you lock your losses, then what? the trader must have well defined plan BEFORE he press buy\sell button. in this plan EVERY POSSIBLE scenario must be included. because if you miss one-that situation will happened. Guaranteed. better yet-you must have plan, which is statistically profitable, at least in past,demo,paper whatever. if trade did not work your way or something unexpected happens-get out. if you hit your stop loss-get out. I can continue, but I believe this is very basic stuff, everyone know this already (except kid on video)
He made back 2K the next day on an account decimated from 55K to 15K. So he is taking some serious hacks at the market. I don't see him quitting his style, talking about stops and all that, considering he is highly leveraged. Definitely overreacted and freaked out, spastic, hilarious and unintended comedy.
I still fail to see why "hedging" as you describe it is better than simply exiting a losing position. You refer to going market neutral. What could be more neutral and give you more peace of mind than being flat, particularly when your timing is off? I pay less than $5 per round turn (as I imagine is the case with most people here), but that does not encourage me to squander my money.
sure,anytime..but you did not explain us,what you going to do with locked loss. please,share your wisdom, i'm all ears..
For a trader that has a huge mental block over a losing position and cannot get out even though they know they should, maybe hedging with a correlated security allows them to "exit" the position without the mental hangup. I would never do it, but maybe this technique would allow a person getting drilled to exit a position without having to admit defeat. I.e., a coping mechanism for people who aren't mentally strong enough to use stops.
I understand your point, but now the trader is riding two horses. How tenable is that for someone who can't admit defeat? If a person has difficulty dealing with straightforwad information, I don't quite see how adding complexity helps the problem. Now he will potentially worry about the timing of two exits. If he couldn't exit a single trade at the right time, then how much confidence can we have that he will exit two simultanously? And if he starts legging out "strategically," then you go get the can of worms while I get the can opener.
Yep, I agree. The real solution is to just exit the losing position. However, once the person puts on the hedge, the heavy burden that is gnawing at their soul is lifted. Maybe then they will be able to see the situation for what it is and make a rational decision to just exit everything. While getting drilled, it is hard to think about anything rationally.