Sunday Musings: Hedge Q & As

Ulli Uncategorized 6 Comments

Yesterday’s post about my new e-book “The SimpleHedge Strategy” prompted a lot of inquires. Reader Dick had this to say:

Thanks for sharing the Hedging e-Booklet. I think the approach is brilliant, and just whatI needed. I have a question though: You talk of a short-term trend line, but I don’t see itbeing replicated, either at your blog or the Trend Tracker site.

Am I missing something? If it isn’t being currently shown, then my obvious suggestion is that you begin to show it atone/both sites. Another suggestion would be to add a subsection called “hedging” to your other categories that you display (i.e., Domestic Funds, ETFs, Sectors, etc.).

That’s the exact plan. Things were a bit hectic leading up to the completion of this e-book, so I neglected to mention the upcoming additions to the weekly commentary and StatSheet.

First, the weekly update, which now features the positions of the domestic and international Trend Tracking Indexes (TTIs), will as of next week also show the position of the (short-term) Hedge Trend line. This will look as follows and is based on last Friday’s close:

Domestic TTI: -12.28%
International TTI: -20.89%
Hedge TTI: -5.40%

Second, whenever I display a chart of the domestic TTI, it will feature the long-term trend line (red) and the short-term trend line (blue) just as shown in the e-book.

Third, starting with next Thursday’s StatSheet, I will add a section titled “The SimpleHedge,” which will show the latest update on the active position, which I have featured in the book, so you can see how it plays out.

As shown above, the Hedge TTI is currently in negative territory by -5.40%. That means I will hold my existing hedge subject to my sell stop, but will not add any new ones until the short-term trend line has been crossed to the upside.

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Comments 6

  1. Hi Ulli,

    This so called Simple Strategy is starting to make more sense as time goes along and you have cleared up several of my questions here already. Thanks again.

  2. Ulli: Many thanks for your post on hedging.
    Can you please clarify my thinking: After buying couple of long positions and one short position. Do we make the following implicit assumption?

    Do we assume that the long position will give higher gains than the loss from short positions – if the market goes up. Also do we assume that the short positions will go up higher than the losses from the long position going down – if the market goes down.

    Is this the implicit assumption in the hedging examples you gave in the booklet?

    Is hedging going to be more profitable thatn being on the sidelines in a money market fund?

    Can you please claridfy why hedging should result only in positive outcomes. Is it equally possible that hedging will do worse than being in the money market fund?

    Is not the outcome from a hedgingn stragey a function of the funds and the short position chosen? I am confused.

    Thanks for your time. If this question makes any sense at all.
    stranger

  3. Many thanks and I look forward to reading your post on Tuesday.
    Do you already implement this hedging strategy for your clients?
    Thanks,
    stranger

  4. Ulli,
    Thanks for staying one step ahead of this for us (your clients). I simply don’t have the time to understand this as fully as you do, and after reading you Hedging Strategy, it seems like you’ve done it again…put your own money out there and test your theories and report it. That’s very transparent in a very obscure financial world at present! Keep up the good work. I’m sleeping well at night in the last 12 months knowing that my money didn’t dissappear like it has for SO many others. I forwarded your stuff to a few collegues who are not so lucky and are now “open minded” to alternative ways of investing.

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