poor man's hedge fund

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pico

pico

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if the market takes off, you need to buy some options because it is impossible for the short to lose more than 100% of the value.

"Hi Johnny, you’re right about starting in March. That was about pivot bottom for the worst decline and then rebound in our generation. That’s the chart I included in the “Bad Chart” example at the end. If you just left the positions open you’d get slaughtered. That’s where the active management comes in. Here’s how you would have made a fortune…Let’s say once FAS was up 50% and running more daily, you said to yourself, “I better take some action here and protect my position from further losses”. You guy and buy puts on FAZ. If FAS continues to run, your FAZ puts come into the money. If FAS falls, the puts will expire worthless, but the double short strategy comes way back into the money because of the early volatility the other way.

While it’s not perfect and you can’t predict what to do in advance, there are ways to offset, and even benefit from a runaway market – but yes, as I stated emphatically throughout, you’ve gotta realize the risks involved and manage the positions closely."
 
When I try to read stuff like this, my brain shuts down in protest. I see FAS and I think Fetal Alcohol Syndrome.
 
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