How To Protect Your ETF Positions During a Market Decline-Follow-Up
A few weeks ago I showed you how to protect your portfolio from a market decline by using the VXX as a hedge. We discussed how this was especially relevant at the time as markets were at yearly highs, volatility had dried up and the fall season has seen many large market declines.
I primarily focused on using the VXX which is the VIX ETF to protect you if the market sold of. Simply by going long VXX, you are going long volatility which tends to rise sharply during market sell-offs.
When we looked at this together, the VXX was trading 57. Since that time the stock market has lost about 3.5% of its value. And how has VXX done? Its gained nearly 10% in value.
As you can see, the hedge was effective. What we want to do going forward is to quantify the movement of the S&P with the movement of the VXX to find an efficient ratio of what that proper hedge should be. This is in our research queue and I’ll share the results with you upon completion.
Announcement: Next Tuesday I’ll be conducting a presentation for our upcoming Swing Trading College. The Swing Trading College remains our number one, most popular course and this is the seventh time we’ve offered it. The class runs 14 weeks and covers short term trading of stocks, ETFs (3 weeks of ETFs), options, E-minis and building a full trading plan along with 4 weeks of live trading.
In this class I’ll be also introducing for the first time a new high probability stock trading strategy, along with trading additional strategies to trade ETFs including Leveraged ETFs.
If you’d like to attend the presentation, please register here.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.