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$spx and $vix sufficiently correlated to use TVIX for hedging?


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  #1 (permalink)
 mcteague 
New York NY USA
 
Experience: Intermediate
Platform: esignal, thinkorswim,
Trading: Stocks
Posts: 122 since Oct 2012
Thanks Given: 63
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Is that $VIX sufficiently correlated (inversely) with the $spx to use TVIX or something like it as a good hedging tool?
And how do you actually hedge the market? Do I wait for the $VIX to be really low and then buy and hold as sort of insurance policy for some big down move I get caught in?

I just started thinking about hedging. Mostly because I just happened to find TVIX recently. It seems that rather than using some sort of options strategy you could use the TVIX without paying a time premium. You might lose a little leverage, but it seems to have some advantages.

Also then the queston is how much to hedge? If using standard money management techniques of limiting loss to 1% in any one position. Does that mean I should off set that amount equally in the hedging instrument? So If I on average have $ 100 at risk would I want to own 100 shares of TVIX and assume a kick to the downside will move it 1 point.

Thanks for any thoughts on TVIX, or any kind of inverse EFT hedging.


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  #3 (permalink)
 mcteague 
New York NY USA
 
Experience: Intermediate
Platform: esignal, thinkorswim,
Trading: Stocks
Posts: 122 since Oct 2012
Thanks Given: 63
Thanks Received: 35


Let me guess. Nobody hedges.


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Last Updated on December 20, 2014


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