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Hedge When You Can, Not When You Have To
You hedge downside when you can, not when you have to.
That was the friendly reminder from Nomura's
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Just over a week ago, a friend in this group and I were pondering just how tempting it must be for hedge funds to front run this buying.
But another outcome sprang up and rattled my thinking a bit. If hedgies do put on this obvious trade, it’s likely that they will be evening up by selling to the models, no?
H-Man, on the money, if you want to short or hedge the position, now is the time — you surely don’t wait to August when fireworks finally arrive.
As a manager of a multi-billion hedging compy manyyears ago. I agree. You are 100% correct. However, the flip side of this coin is even more important. When the panic has set in, it is time to get out of your hedge – take someone’s bid. Let them feel safe – and poorer. It’s how we made a living.
It only took one burn from the flame about 25 years ago to tell me the heat is always too hot for me. Once bitten …