Options Trading Pro Tip | Hedging Your Options Portfolio

Options Trading Pro Tip | Hedging Your Options Portfolio
Options Trader John Napolitano goes over how traders manage their money all the time and it's really effective. Even if the hedge doesn't work, then guess what? Your portfolio's going up and that's a great thing.
Trade Options with John Napolitano
stocktradingpro.com/trading-options
That's actually a good question. Do you mind if I get into that a little bit deeper? Let's actually use let's say the market went up for 10 days in a row, just as an example. And I'll again, just as an example, cause I wanna give everybody actionable stuff. Let's say you're long, a thousand shares of the spy, just as an example, and however you look at the market, you see it slowing down or you think whatever's going on, you think, okay, this is cool.
  📍 I wanna lock this in.
 You mentioned hedging at the beginning of the call, and now we're bringing it up again. Now a thousand shares is 10 options contracts. Would Would you, would it be 10 options contracts or would you, would it be part of that? Again, this is all for educational purposes, but what would your thought process
be on that?
  📍 Again, that's where Delta comes in because Delta's that probability measure, right?
 So if you pick an out of the money put, it would actually be more than 10 contracts. If you do a 50 delta in order to be a hundred percent hedged if you find 50 Delta puts, you'd actually have to buy 20 of them to be one for one.
Because of nature of delta. It really depends on how, what percentage you want to be hedged. If you wanna be fully delta neutral, which not, isn't always a good idea, right? If you're net bullish, but you're like a
  📍 little bit nervous of a pullback, you might wanna just
 be 20 or 30% hedged, in which case what you said makes sense.
You would just buy 30 delta puts and just buy 10 of them.
I know a lot of traders that do that straight up with equities, where stocks are very strong and they're heavier on the long side, but they're also paying attention to which stocks are showing relative weakness. So just using round numbers,
  📍 they'll be long, a thousand or short 300 of those weak stocks.
 So while these things top out, then they already have a short position on, in the other direction in the stocks that already had relative weakness to the.
Yeah, you're just basically doing a short term trade as a hedge. Exactly.
  📍 And you take it off once the danger has passed.
 Exactly. That comes a little timing.
Gotta be good at timing on that, but if you understand how to do that it helps you hold trades longer that you might normally have gotten shaken out of or stopped out of because you were smart enough or had the knowledge to put that
hedge on. Absolutely. And as a broader portfolio too, you don't wanna get shaken out of things.
Absolutely. And that's how people manage their money all the time. And it's really effective. Because even if the hedge doesn't work, then guess what? Your portfolio's going up. So it's, so that's essentially what's going on. So it's a, it's a good thing.
In this video, we will discuss the concept of hedging and how it can be applied to your trading portfolio. Hedging is a risk management strategy used to protect against potential losses in a portfolio by taking offsetting positions in related assets.
We will cover various hedging techniques, including using options contracts, futures contracts, and other derivative instruments. We will also explore how to identify when it may be appropriate to use a hedging strategy and how to implement it effectively.
By the end of this video, you will have a better understanding of how to manage risk in your trading portfolio through hedging and be equipped with practical strategies to help protect against potential losses.
John Napolitano: Options Trader
Support: [e-mail]
Disclaimer:
toptradingpros...