Quick lesson on hedging
10/26/23 - Prospero.Ai Trading Letter
This one goes out to our paid and free readers. Our Model Portfolio, despite being more short than long has taken a small hit (36% above SPY vs. 40% this weekend). Our longs from the start have been growth/profitability plays so those will naturally get hit harder than the SPY which is much more profitability focused. We knew this and expected the market to go down, so why were we comfortable with a 51 to 39 (short to long) portfolio in spite of all of this?
Because everyone is running scared now, and leaning too far into that can get you a much bigger loss than a 4% move in 3 days (vs. the SPY) our goal is to pick winners and losers well and make our big directional bets when we think we think we know something the market doesn’t.
Covered in this letter:
QQQ and SPY Net Options Sentiment / Market Update
Net Options, Social Sentiment and Upside Breakout Movers
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