For the past 6-7 weeks, to ill effect, I've held some long dated puts on the S&P 500 index as an insurance policy. It has generally been in the 0.5 to 1% range, and has been a money loser repeatedly during the melt up rally (large in % terms, but manageable in dollar terms). As an insurance policy that is understandable, as the long side of the portfolio has been going up, and hence this part of the portfolio down. That said, I'd like to see the insurance pay off one of these days since a big drop in the market would create some whopper gains in this instrument. The 115 contract is roughly S&P 500 level 1150, so if either of these gaps of 1090 or 1110 are filled in the coming months, good things should happen.
With the first signs of weakness in the broader market the past 3 days, I've increased my 'insurance policy' from a 0.5% exposure to about 1.2%. That is the largest it has been since I started it... I have until January for this to pay off.
I also threw some short TNA ETF (2% exposure) on as a hedge, as a nearer term play.
Long January 2011 SPY 115 puts in fund; no personal position
Tuesday, November 16, 2010
Bookkeeping: Adding to My Long Term Portfolio Insurance via Jan 115 SPY Puts
Best Of FMMF
- 1: Warren Buffet Piles on Europe
- 2: [Video] Jim Chanos Returns from Europe, Even More Bearish on China
- 3: A Chart to Open Our Eyes - Staggering Changes by Multinationals in Employment Behavior 00s vs 90s
- 4: Futures Blasted on Dexia Woes... and Poor Preliminary China Data
- 5: Market Working to Worst Thanksgiving Since 1932
- 6: Et Tu, German Bonds? Poor Auction Raises Eyebrows