Why It Pays To Hedge

I was looking for a deep retracement. With futures down over 20 points this morning, I got a little more than I was looking for. That often seems to be the case in the market.

My speculation last Friday was for a choppy decline that would trap shorts then reverse, in other words, a classic b-wave. The odds of that happening now are very low.

As always, it depends how the S&P cash market opens. But even if it bounces, my targets are only the Friday highs at this point, 1158.14 and possibly 1161.62.

This is why it pays to hedge.

I got a great fill on the pop to 1161.62 of Friday, pretty much nailed that high with the SH (ProShares Short S&P) ETF. It was a small hedge, riskwise, but when you're hedging SPY options, it doesn't take much. This position and some SDS and SPXU from the other day will save my butt, and put some in the bank too.

My downside targets are below 1100, possibly 1000 on the S&P. I'm being patient with them. I'm also aware that bounces appear out of nowhere at times. I'm still looking for one -- the move off the 1123.50 lows of the futures this morning being a good start.