We're certainly having a good time and, if you've been following our posts and getting our trade ideas – you probably are too as yesterday's DXD trade idea, for example, made 100% in a day for the 2nd time this week!
Now let's say you put just 2% of your portfolio into a hedge like that against a worry that we'd have a 5% drop. Well, on Tuesday we collected 100% of that 2% on a 2.5% drop and yesterday we collected another 100% of 2% on another 2.5% drop – there's 4% back and we never even fell 5%. This is how you hedge and hedging is what we teach you to do at PSW (sorry, Memberships now full, try the wait list for next month).
Those are the hedging strategies that led us to call for shorts yesterday (right in the morning post) at 1,100 on /TF (Russell Futures), 4,040 on /NQ (Nasdaq Futures), 1,965 on /ES (S&P Futures) and 16,900 on /YM (Dow Futures). Aside from the Alert we sent to our Members, we also Tweeted out and Facebooked? the trade ideas – THAT'S HOW SURE WE WERE! If you followed those, we closed the day at:
- Dow (/YM) 16,550: down 350 points at $5 per point – Gain of $1,750 per contract
- S&P (/ES) 1,918: down 47 ponts at $50 per point – Gain of $2,350 per contract
- Nasdaq (/NQ) 3,950: down 90 points at $20 per point – Gain of $1,800 per contract
- Russell (/TF) 1,060: down 40 points at $100 per point – Gain of $4,000 per contract
The margin requirements for the Futures trades are roughly $4,000 per contract so we're talking net gains of roughly 50-100% IN A SINGLE DAY on our hedges. It's a very simple process – we send out an alert pre-market and we have a Live Member Chat Room where we discuss these and other trade all day long as the market progresses – this allows us to adapt to changing market conditions very quickly.
Of course, our whole Short-Term Portfolio is a hedge for our 2 Long-Term Portfolios, so we are very happy campers as we closed the day up 63%. Of course our Income Portfolio and Long-Term Portfolio (one is Conservative and one is Aggressive) both lost some money, but, as we discussed extensively in Member Chat this morning (very good discussion on Portfolio Management Techniques as well as Crash Management, Following the Crowd and Valuation Studies in a Down Market), we are more than happy to use the short-term cash gains to add to our long-term positions.
That's fine, as this is the 5-10% correction we had been waiting for. In fact, just over a week ago, in our Live Member Chat room at 9:41am - I said:
Dow 17,350 to 16,800 is 550 = 3.17%. That could be 2.5% with a 0.5% overshoot or it could be (since we finished at the low) a fairly good indicator that we'll be completing the 5% drop to 16,500.
In that same post we called gold (/YG) long at 1,200 (now $1,221 and up $750 per contract) and silver long at $17.15 (now $17.30 and up $750 per contract too) and GDX has now completed the down pattern we were following that day so we'll be pulling the trigger on some miners back in our Live Member Chat Room today and next week.
Yesterday we flipped long into the close with a very aggressive TNA bull call spread into next week's expiration. It was the October $58/60.50 bull call spread, which filled at 0.95 and finished a bit lower with TNA at $57.50 into the close but we needed a long for our Short-Term Portfolio, as well as our $25,000 Portfolio.
No matter which way today goes, we intend to keep a bearish stance into the weekend. In fact, like Wednesday, when we shorted the open – the higher the market goes today the more we'll see it as a chance to beef up our shorts. Still, I think it's more likely the relentless Fed hawks will give us the nice, blow-off bottom we've been waiting for – and then we can hit the Buy List!
Have a great weekend,
- Phil
Tags: DIA, DXD, EWJ, Futures Trading Webinar, Hedging, hedging strategies, IWM, Options Education, Options Strategies, Smart Portfolio Management, SPY, TNA, TZA
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