A brief lesson on hedging as well as my favorite picks from the options market that I think investors and traders should take a look at for the week of November 18th, 2018.
Good Stuff Happens in 1:1 Meetings: Why you need them and how to do them well
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DrosNotes - 11.18.2018 - Hedging Lesson and Stock Tips
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DROSNOTES
The Art Of Hedging and Stocks To Watch
If youâve been following me for a while on StockTwits or Twitter, or more so if
youâve been in my trading room youâve probably heard me say to ALWAYS
hedge. What does that mean exactly?
I use a see-saw analogyâŠdespite how many kids are weighing down the
side against you, if you have a fat-kid friend he can always hop on there and
switch the scales in your favor in an instant.
The thing is, you can never be sure when youâll need that fat kid to help
switch the balance of power for you so your side ends up on top. My
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David Tepper -
Legendary Hedge Fund
Manager - Picture via
CNBC
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solution?
Always keep the fat kid around. Even in the most bullish markets aroundâŠkeep a little bit of the
fatty around somewhere. Which one you want to keep around depends on what you have in your
portfolio. I also recommend using hedge equity so you donât get totally burned on the position if the
bull rally continues.
My favorites are $SDS (inverse of the S&P 500), $QID and
$SQQQ (both inverses of the Nasdaq 100; $SQQQ. Is
triple leveragedâŠ.so if your portfolio is heavyweight on
tech thats the one for you). Then thereâs my favorite
inverse Dow Jones ETF ($DOG) and my favorite inverse
$FXI (China Large Cap) ETF $YANG. I also keep $TVIX
equity in my portfolio. I keep all of the above in my
portfolio at all times. I add as I need to (as markets pull
back more and seem more bearish) or I trim positions for
proïŹts (if markets are very bullish). But I ALWAYS keep
some equity of them all because you simply never know
which morning youâre going to wake up and wish you had
them.
I always explain it like this also to those who are scared to
own positions that protect against downside in super bull
marketsâŠif you own a tiny % allocation of your portfolio
in those âhedgeâ equity names and the markets continue
on in a bullish form, the money lost on the hedges will be more than made up
by your bullish gains. But if the market takes a sudden hit, youâve got the fat
kid in your corner that will pop in whenever you want him to and keep your
aïŹoat rather than burning through your port.
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Peter Lynch quote via
catalystinvesting.org
Trade Ideas and Thoughts For The Week Ahead
I would expect another fairly volatile week ahead unless some sort
Of resolution is made with China. And Russia. And after the latest news about Khashoggi,
the UAE as well. At the time of this writing, 7:40 PM EST on Sunday, the futures look
decentâŠ.from a chart perspective at least. Price-wise $ES_F is down 9 bucks, $NQ_F is
down 25, and the Dow is down $58. The charts look decent though so I donât think we
open blood red tomorrow morning.
But you never know what the overnight session will bring, as well the morning with some
data and earnings. Regardless, hereâs some names Iâll be looking at.
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Letâs start with some of my âdrosFlowâ, or the favorite UOA I saw last week.
$PZZA DEC18 $62.5 Calls | Notional Value: $237,510 | Bought with underlying @ $59.75
$CTSH 30NOV18 $70 Calls | Notional Value: $320,000 | Underlying $68.90
$SMH 07DEC18 $95 Calls | Notional: $839,000
$ET JAN19 Cs
$MLCO JAN19 $17 Cs
$VMIN JAN19 $3 Cs
$NXPI DEC18 $85 Cs | Notional: $775,000
$AAPL 23NOV18 $190 Cs | Notional: $1,320,000.00
Thatâs enough drosFlow for now; come stop by the trading room for more: DrosCrew.echoïŹn.co
Now for some of the top UOA from FridayâŠ.
Bull Flow
$TLT (short-term bull spread)
$PAGS JAN19 $25 Cs
$FXI NOV18 $44 Cs
$WTW JAN19 $50 Cs
$BILI NOV18 $12.5 Cs
$LPI APR19 $7 Cs
$ECA JAN19 $8 Cs
$IQ JUN19 $22.5 Cs
$XME JAN19 $31 Cs
$CVE JAN19 $9 Cs
$DHI JAN19 $31 Cs
Bear Flow
$URBN JAN19 $31 Ps
$DG JAN19 $110 Ps
$BBBY 10JAN19 $12.5 Ps
$STX JAN19 $42 Ps
$XLB JAN19 $51 Ps
I still think the markets arenât terminal, but you should expect a ton of chop this week. Note that my favorite ïŹow
up there is mostly out to January; in this scenario theta is your friend.
Good luck out there and trade safe.
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âš
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Cheers,
- Dros
www.androstrades.com
DrosCrew.echoïŹn.co
stocktwits.com/androsform
twitter.com/androsform