This post was just published on ZYX Buy Change Alert.
Our models expect more volatility in the U. S. stock market. Consider accumulating up to 65% of the full core position size in the zone of $$24.31 to $27.61. Typically VXX goes up when S&P 500 goes down. As of this writing VXX is trading at $27.46. It does not make sense to have stops on this position. To control risk, consider controlling the quantity and entry points within the buy zone that are line with your risk tolerance. Target zone is $36 to $39.
Those who are not hedged with zero cost vertical option spreads may consider using a very small quantity of VXX as a hedge.
For your convenience, reproduced below is a post from January 4, 2013
ANSWERS TO QUESTIONS ON HEDGING
I do not want to hedge, what else can I do?
The simplest way is to raise some cash. It is as simple as understanding that unrealized profits can quickly disappear.
The simple practice of slowly taking some money off the table when the market is high and reinvesting it back when the market is low can make a dramatic difference in your profits over a period of time.
What is the best time to hedge?
The best time to hedge is when the hedges are cheap and there are significant risks ahead; this is the case now.
What are the best instruments to use for hedging?
It varies widely based on market conditions and the pricing of hedges. There are instruments that may be appropriate for hedging at one time and may be the wrong instruments at another time.
Right now the best way to hedge is to use a combination of a very, very small quantity of VXX, a very small quantity of VXZ, a ladder of debit put spreads on S&P 500, a ladder of credit call spreads on S&P 500, and some covered call writing on existing positions.
How can I learn more about hedging?
Those who want to learn themselves may consider attending the Hedge The Risk online coaching seminar. Subscribers receive a 70% discount.
Should hedging be customized?
Definitely, yes. No one size fits all. A hedging program should be customized based on the portfolio and the objectives.
Do I need to hedge very long-term positions?
If you are comfortable with the fundamental thesis behind your very long-term positions and also have enough cash to take advantage of any market dips, very long-term positions need not be hedged.
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