I have puts on all my longs, all with May expiry: QCOM, JDSU, CSCO, EMC, AOL. This last Monday I was all the way long in common and calls, but when I saw the put/call ratio being super low, and the futures being sold off, I painfully decided to either close my calls, or buy puts to straddle the calls, or buy puts to hedge the common. It was expensive, and I decided to buy them 10-20 points OTM, and use them as a catastrophic fire insurance, not thinking the market would really take a dive prior to earnings. I lost about 20% before the puts started kicking in, but now I am making $1 for every $1 I lose on my calls and common, other than the gradual time degradation. Next week I will have to decide what to do with this hedge. If the market bottoms out, I will close my puts and let my long positions ride up. If we do another 1929, I will close my calls, sell my common, and ride my puts for a while. If the market does nothing, I will probably close everything and go cash, because that means the market is going to wait for the May Fed to sell off, and my May puts will degrade too much.
All together I am 40% off my portfolio highs, since I did not do this strategy until I was already down 20%, but I figure if we bottom out I should make back that 40% pretty quickly by closing my puts. If not, hey, 40% down is not bad consider the +1200% year I've had.
Oh, I also got some GMST puts to straddle my calls. |
