Author Topic: Pair hedging a long position with options on high priced related sector stocks?  (Read 1057 times)

scorpioncapital

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Has anyone heard of or done a kind of hedging of a long position that you wanted to hold long-term against a stock with a similar end-market regional profile and in the same or similar industry that you felt was severely overpriced relative to peers? ( For example through buying puts or selling deep out of the money calls). I'm weighing this against hedging with the S&P or a sector index but it seems if there are sector headwinds, the short will offset the long position while you hold it long-term and if the sector does well, you may still be able not to lose much on the hedge , in fact, being time-dependent and very out of the money you may make a small profit until expiry).