I tend to learn something every down turn. This one is no exception. Will keep it short and sweet.
1. Always keep a hedge on. Whether that is VIX futures, SPX puts, /es put or puts on your portfolio. I calculated my SPX hedges that I closed 3 weeks before the market sold off, each contract peaked at 43k Christmas eve, I had 2. That would have more than offset my losses and given me a pile of cash to trade or pay off my mortgage. I think going forward I will sell some leap puts on something I want to own and use the proceeds to cover hedges for an entire year. Call it the house paid for lottery ticket. If it even pays off once a year is worth it. Even once every 2-3 years it will pay for itself.
2. When direction starts to change, quickly ratio your spreads for the directional kick. Perhaps as early as delta 30.
3. Long stock set up a 30 dte synthetic short. Sell 1 atm call on your stock and buy just as many atm puts. At least then your losses are capped and may be a lottery ticket again. Good idea for IRAs.
4. Always keep some cash handy for opportunities like this.
5. Once a spread is deep ITM, probably better to close it and start over. Commissions are low enough now even at TOS that I probably should have reset 3 of my #fuzzy.
6. Volatility creates opportunity but also sometimes wide spreads and trouble trading. What you thought was liquid not so much when the SPX is down 300 points. Better to have the adjustment on early.
7. Not sure the bear is over but today helped all my positions so I will start looking to unwind when I can. Market drops give you a chance to reset trades.
8. Once a bottom is put in go syntheic long and don’t cap your gains!!
Hope everyone else is recovering and has some cash ready 🙂