Hedging against a recession

[milo]

Hello,

everybody is saying we are headed into a recession. real estate prices are falling, the stock market is faltering. How do you plan on hedging your real estate properties and/or investment portfolios? I would like to hear from other traders/investors who have first-hand experience doing this. are you gonna use options, futures, or??


thanks

[Alchemist]

leth and bird,

you wanna take a shot at this? you are the options gurus!!

[Leth]

hmm...guru..not even close. good one frank...lol

lets see...i dont really hedge. i look at options more as a leverage tool than i do a market persay. i suppose my hedging strategy (if you wanna call it that) would be diversifcation. if there is a recession in a certain sector (being that the trend is down), i go with the trend by being short. for example, i may be short on a certain sector (e.g. real estate) and at the same time, i may be bullish on another sector (e.g. bonds).
i know it doesnt help much, but thats about as technical as i get on hedging.

[Alchemist]

Originally Posted by Leth

hmm...guru..not even close. good one frank...lol

you know more than you think

Originally Posted by Leth

i suppose my hedging strategy (if you wanna call it that) would be diversifcation.

this is actually an interesting concept. why does one decide to hedge? to reduce a certain type of risk, be it market risk or security-specific risk. Diversification is a risk management tool to reduce unsystematic risk.

interesting discussion. anyone else wants to share his ideas on this?

[aiki14]

I have been playing a type of straddle that can be looked at as a downside hedge.
VIX calls and QQQQ Calls

You options guys are saying, wait a minute thats not a straddle, but the VIX reacts to downside moves and of course the q's are a play on the upside. This has been cheaper than a straight up QQQQ straddle and when the VIX spiked to 37 last week they went up 175%.
I rolled into the same positions for the march expiration and today fully expected the VIX calls to come in, and of course the q's came in. That's a good example of playing a straddle, or hedging against your long positions, that goes exactly the opposite of what you think and you make money. The very definition of a hedge.