With SDS trading around $17 late Thursday, I sold one lot of June 1 weekly $17 puts for $.26. A weekly option made this essentially a 1 day trade. That is about as long as you can hold these double short etfs anyway, so it seems like this approach enforces the discipline of a short holding period for these type pf positions. Also implied volatility was high so the option premium seemed rich. Yes, I know this is a derivative of a leverage derivative, but....hey....when in Rome...lol
Anyway...This trade capped the potential gain for trade at 1.8%, in exchange for having a 1.5% cushion on the downside before the trade would lose money. My logic was
- if the unemployment numbers would be good, that might not be enough to drive the market up too much and the 1.5% cushion might provide a way to get out of the trade with a tie.
- if the unemployment report was bad , the market would be down and the trade would return 1.8%
BUT....A win is a win.
2-1-4 hedging via double shorts this year.