Somebody told me they were down 10 grand right at the opening bell.
What the hell do you mean you’re down 10 grand? The market wasn’t even moving that much. We had like a percent and a half move in the Nasdaq.
I’ll say this as eloquently as I possibly can. Not everybody fits into this, but the generation of traders we have now has absolutely no clue what to do when markets start to sell off, and we’re not even two weeks into this selling.
Eventually, maybe they’ll figure out how to buy puts. I’m being a little sarcastic. What I mean is, you can cut your exposure in literally two tenths of a second.
26 Deltas Is A Nothing Burger
Delta is how much a position gains or loses when the market moves a dollar. Beta weighting turns every position you own into one number, measured in shares of the SPDR S&P 500 ETF (SPY), so you can see your total market risk at a glance.
In one of my portfolios, my aggregate SPY delta risk is 26 deltas. Seriously, you take more risk walking out of your house into your garage every day.
There’s no real directional risk in there right now. It’s a nothing burger.
Clip It
In another account, I’m at negative 800 deltas. That’s the equivalent of being short 800 shares of SPY.
If I don’t like the weather in the marketplace, I can buy one S&P futures contract. One E-mini S&P 500 is the equivalent of 500 SPY deltas, so buying one takes me from negative 800 to negative 300.
All I did was compress my risk.
I could take it all the way to zero, but I don’t like the idea of going to zero delta. Take some freaking risk.
And you don’t have to trade the big boy S&Ps, either. A Micro E-mini is 50 SPY deltas, so you can shave off a little at a time.
There’s No Love In The Market
The same goes for a stock that’s killing you. If you exit, you take a loss. If you stay in it, it could be a much bigger loss.
The market is a bunch of numbers, and nobody loves anybody in here. Do you think it goes home at night like, “Yeah, I really screwed that guy in Flagstaff, Arizona”? It doesn’t do that.
So if you don’t like your positions, just get out. It’s okay.
To your success,
Don Kaufman
