% | $
Quotes you view appear here for quick access.

Templeton Emerging Markets Inco Message Board

  • Nasdaqi Nasdaqi Oct 12, 2008 7:41 PM Flag

    Please suggest a way to protect from the downside

    I own too many bonds, lots of foreign. Now it dawns on me I should have bought some puts or short to protect from such days.

    Please suggest a few good ways to do it.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • If one posits that bond cef's tend to move in the direction of the primary market, and my experience is they do so more than 70% of the time, then inverse funds would be a hedge. Say you want to be hedged, but still long exposed, use a 130% long/vs 100 short percentage exposure. For each $1 of a bond cef for which you have downside concern, buy $.77 of either DXD, SDS, or QID. These are 2X inverse of the Dow, SPY, and QQQQ, depending upon market conditions.

      Certainly, after this much cascading selling, and the VIX over 70, why would one want to get short here in ANYTHING?

      But, once we get a reflex bounce, you might consider one of the inverse funds as a way to lay off risk in inverse proportion to your long exposure.

      One way; maybe not the best way..... I prefer to hedge with cash in this environment. When I see assets selling at 100 year flood prices, I like to buy dips and sell rips. Keeping cash in higher levels lets me season positions that I want to hold for longer positions, milking dividends while I wait.

      Good luck. I like your odds in TEI at these levels.

      • 1 Reply to gaboystock
      • You get involved with too many different positions in different directions, chances are you'll completely lose track of things and make really stupid decisions. Leave that to the fancy institutions with millions of dollars in computer systems to monitor and trade their positions.

        The simplest way to hedge is to sell part of your position on huge up days like today. Always holding out for top dollar (i.e. trying to time tops) in the market is a sure way to get killed. And if you don't believe me, ask Joseph Kennedy (JFK's father) who sold all his stock positions before the crash of 1929.

10.51+0.04(+0.38%)May 26 4:02 PMEDT