Hedging Against Watergate05/17/17
Trump really is as dumb as they warned us. Last week when he fired Comey I thought to myself,
"this won't end well" and after the market kept stable for a day or two I bought 5 SPX
May 26 2380 puts (
SPXW 170524 P 2380). Cost basis is $6,358.42.
It wasn't particularly calculated - I just had roughly that much cash sitting idle so I moved it into a puts position that had a couple weeks to breathe. Just bought the fuckers with a market order.
For the next several days the market edged up and my puts deteriorated, to the point where I was down about 75%. Yesterday I thought about selling them and cutting my losses but decided to stick to my guns and let the position run its course. Well, today I was vindicated in doing so as the market fell over 1.5%.
Part of the reason I'm writing this post is to highlight how effective options can be for hedging. My portfolio is very simple right now:
Ticker Qty Cost basis AMZN 100 $93,799.45 FB 600 $89,866.95 GOOG 100 $92,605.98 SPXW 170524 P 2380 5 $6,358.42Today, with the bloodbath from the Comey memo, the end-of-day change was:
Ticker Abs Percent AMZN -$2,131.00 -2.21% FB -$2,958.00 -3.29% GOOG -$2,338.00 -2.48% SPXW170524P2380 +$11,450.00 +618.92% +$4,023.00 +1.42%So a $6000 position protected my entire portfolio from a 2.5% drop - I actually made 1.4%. Of course the puts trade was purely based on gut instinct that the market has been on thin ice and I just as easily could have been wrong, but I feel good about the fact that I stuck with my original trade plan and it's working out how I expected. You can't control whether you're right but you can control how consistent you are. And no I haven't sold yet.