News. Tools. Hedging Equity Risk with VIX Futures. One of the most difficult aspects in long-term investing is to keep your long investments on even though you feel like there just *has* to be an equity correction coming soon.
Your traditional options are simple: 1) hold on/pray or 2) sell everything and hope for a correction that comes with a sign of when to get back in. Those two methodologies leave a lot to be desired. The second level of sophistication involves: 1) shorting equity futures against your long stock positions, 2) selling call options on the stocks you own (covered calls), or 3) buying put options on the individual stocks or the index overall.
These are better ways to take some chips off the table, but they still leave a bit to be desired. Hedging Equity Risk with VIX Futures. One of the most difficult aspects in long-term investing is to keep your long investments on even though you feel like there just *has* to be an equity correction coming soon. Your traditional options are simple: 1) hold on/pray or 2) sell everything and hope for a correction that comes with a sign of when to get back in. Those two methodologies leave a lot to be desired. The second level of sophistication involves: 1) shorting equity futures against your long stock positions, 2) selling call options on the stocks you own (covered calls), or 3) buying put options on the individual stocks or the index overall. These are better ways to take some chips off the table, but they still leave a bit to be desired.