Author Topic: Protecting the portfolio in a bear-market (inverse ETFs?)  (Read 2941 times)

SHDL

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #10 on: December 25, 2018, 08:54:36 AM »
Put options are the most obvious instrument for this.

And +1 on avoiding inverse ETFs.


KJP

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #11 on: December 25, 2018, 09:03:02 AM »
Agree on avoiding inverse ETFs.  Because of daily rebalancing, they will not match the inverse of the performance of the index over time.

John Hjorth

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #12 on: December 25, 2018, 11:15:34 AM »
Per,

Also, ref. Cardboard's post #7 : Joel Stevens - Austin Value Capital [November 15th 2014] : Why hold cash?.

[Joel is our fellow CoBF member racemize.]

Edit:

Fixed second link.
« Last Edit: December 25, 2018, 11:39:53 AM by John Hjorth »
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NewbieD

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #13 on: December 26, 2018, 03:52:33 AM »
Inverse ETFs should only be used for short-term ideas - the more leverage the shorter.

Had a colleague who invested in the JNUG junior gold miners 3x levered ETF. I didn't manage to convince him it was a bad idea even after showing the JDST 3x inverse overlayed on top, showing both down 90%+ over a longer term graph.

So many other options. I have used moving to cash, fixed income and buying puts. Puts is probably too late as said due to vol levels so if you want to protect further downside you could consider put spreads to reduce risk of vol normalising to your option value. Makes sense if you believe in some limited further downside. Futures can offer a linear hedge to index exposure.

Moving a portion of portfolio into merger arbitrage - not too experienced in this area but it seems risk premiums are increasing lately (Swedish market) - not sure the risk for deals falling through have increased as much. Guess this could be mostly driven by liquidity?

perulv

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #14 on: December 26, 2018, 06:48:16 AM »
Thanks for all the valuable advice and thoughts. I have nothing to add, and will probably spend the next days reading and thinking, rather than doing any trades.

Fearful Optimism

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Re: Protecting the portfolio in a bear-market (inverse ETFs?)
« Reply #15 on: January 04, 2019, 01:35:42 PM »
Totally agree with not owning inverse ETFs to protect.

A better strategy would be to short the leveraged long ETFs.  If I am looking at this correctly on IB, it appears you are getting paid to short some of them (UPRO, TQQQ).