Hedging the S&P 500 with Volatility

It’s expensive to buy securities that track volatility.  Their holding costs are so high that your timing has to be exquisite in order to end up with a profit.  However, if you’re hedging a short volatility position, or poised to jump into the general market at a possible transition point a long volatility position might make sense. Consider this chart: Will the S&P 500 bounce …

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Protecting Junk Bond Principal With a Volatility Hedge

At the moment investment grade bonds with their low yields and risky exposure to interest rates are unattractive places to put your money.   Broad equity indexes like the S&P 500 have higher potential gains and dividend yields in the 2% range, but the dramatic drawdowns of 2008/2009 are still fresh in our minds.   Commodities like gold and oil look expensive—so where is a …

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