Ep 76: Hedging a Portfolio in Trouble and Killing Your Risk!

★ SUMMARY ★
in this episode we’re going to be discussing hedging a portfolio in trouble or preparing for a fast market move.

I’ve already actually shot this video, and unfortunately we had a video crash so I had to record it, so here what I want to do is, right around 3 o’clock in the afternoon, March 17th 2016, I’m going to go ahead and re-film this video and give you some insight.

Some of these positions that we’ll be talking about are actually just some of the things that I’ve actually just done. So here we are in a simulated trading panel and platform, with fake money, not real money that I’m going to share some insight with you about hedging, and understanding how to hedge, what is hedging, why you may want to hedge and so forth.

Let’s get started
To get the discussion started, let’s go ahead and first look at a general portfolio. And if we were to do that, let’s go ahead and purchase some shares, again, fake shares, fake money.

We’ll go ahead and purchase some shares, let’s say 100 shares of Caterpillar right here, so we went ahead, we got filled in that, and we’ll go ahead and get some shares of Wal-Mart. We’ll go ahead and get 100 shares of Wal-Mart as well.

We’re filled in both of those, and now you can see we have 100 shares of caterpillar, 100 shares of Wal-Mart, and we’re actually already up $10, which, things move pretty quick in the market. But if you look at this over all, as a portfolio beta waited, and I’ll go ahead and just hide the simulations.

You can see that right here on a portfolio beta waited, you can see that right here, as these stocks move up, this is my portfolio.

This typically is used a lot in option trading portfolio. And with option trading there’s a lot of time expiration, which I’ve done here in episode 75, but my goal for you here to discuss some hedging is really to see how far advanced we can get in these lessons.

Learn how to manage your portfolio
With hedging, it’s all about learning how to manage your portfolio. This profit and loss graph that we’re looking at right here, this is just a picture that shows your positions.

And if you start understanding these positions and know what is happening to your portfolio, you’re able to better make changes and adjustments when a black swan event happens. When something unexpectedly happens, or if you expect the market to sell off.

I’ve put these positions in a more positive direction, because that’s how a portfolio is typically structured, we look for stock appreciation. But of course you could have shorting positions in here and all kinds of other positions. Don’t let that confuse you; you could do this exact same thing to the negative side as well.

Here in this example we have a few basic positions on, and if we go ahead and just look at the portfolio beta waited on caterpillar, you can see that right here we have a delta of 100, what does that mean? It means that for every dollar move that stock head higher, we make $100, because we have 100 shares.

Posted at: http://tradersfly.com/2016/03/ep-76-hedging-a-portfolio-in-trouble/

★ SHARE THIS VIDEO ★

★ SUBSCRIBE TO MY YOUTUBE: ★
http://bit.ly/addtradersfly

★ ABOUT TRADERSFLY ★
TradersFly is a place where I enjoy sharing my knowledge and experience about the stock market, trading, and investing.

Stock trading can be a brutal industry especially if you are new. Watch my free educational training videos to avoid making large mistakes and to just continue to get better.

Stock trading and investing is a long journey – it doesn’t happen overnight. If you are interested to share some insight or contribute to the community we’d love to have you subscribe and join us!

STOCK TRADING COURSES:
— http://tradersfly.com/courses/

STOCK TRADING BOOKS:
— http://tradersfly.com/books/

WEBSITES:
— http://rise2learn.com
— http://tradersfly.com
— http://backstageincome.com
— http://sashaevdakov.com

SOCIAL MEDIA:
— http://twitter.com/tradersfly
— http://facebook.com/tradersfly

MY YOUTUBE CHANNELS:
— TradersFly: http://bit.ly/tradersfly
— BackstageIncome: http://bit.ly/backstageincome

source

RELATED ARTICLESMORE FROM AUTHOR

21 COMMENTS

  3. I like your videos. If I have 100 shares of 4 different stocks, and say my account is $50k, how many people really leave 50% or more of there account available to buy a hedge? Shorting 400 shares of QQQ is almost $75k. Isnt it a lot easier and cheaper to hedge with a put options, or in this case, 4 put options?

  6. Hey a question thats been bugging me for some time, how is risking say 600 bucks to make 100 bucks a wise choice, been seeing many of these so called teacher traders saying or showing this? through credit or calender and debit spreads/ does not sound wise to me, to risk more to make less even with a higher probability of success still sounds dumb

  9. Would you consider this a type of hedging technique… For example (I'm just using number at the top of my head)…. if u were to buy 2 lots on AUDUSD for a 20 pip target. At the same time, you sell say 4 contracts of GBPAUD for a 30 pip target…these two have consistently traded inversely to one another… I find that it's a matter of getting the position sizing right and that's it… Thoughts?

  10. wow. Every time i watch your videos i learn something new. Every video is super informative. I wish i could have you as my mentor…. Extremely intelligent and smart about stock market. And i also watch backstage income channel from time to time. Thank you for your time and great lessons Sasha.

  15. Hello Sasha

      Should be opposed to the kind of stock?
    I missed the rising tide over the last month that I went short on the Spy.
    And closing Long Positions
    I went again shorting the Spy $ 204 with $ 2.5 stop.
      Failure here would be my third
    I'm not looking to add Long shares, although the market moved to Long. I tend to think it would be an amendment down.

  16. I'm currently figuring out my trading style and how to improve my stock picking strategy, I currently simulation trade but I'm definitely going to go to traders fly, your videos are so helpful for the inexperienced like myself. Thank you

  19. Thanks Sasha, great video! I have watched many of your free videos and paid courses over the past year and was wanting to learn more about hedging and some slightly more advanced topics, so this came at a great time. Would love to hear more about hedging techniques as you mentioned in this episode. Thanks for all the work you put into these, your courses, and the Tradersfly site.

  20. @Sasha Evdakov what's the purpose of hedging? If I felt that the market is likely to reverse, should I just not exit my position instead of buying an inverse position in order to hedge? Is your only reasoning, to not incur transaction fees, and that you might have to exit out of multiple positions?

LEAVE A REPLY

Please enter your comment!
Please enter your name here