Sunday, March 09, 2008

Hedged positions

Here's a trade I put on a week ago. It's been steadily increasing in Profit. I realize it's not a perfect hedged position. Short Russell 2000 with a long SP 500 hedge, and long 2yr notes with a short 30yr bond hedge. (I could have used 2 contracts on ZF to make the ZB hedge better balanced and put the position in the green by another 1k).


eddie on 9:25 PM said...

Would this be cosidered a pairs trading strategy? How do you know wich indices correlate with each other to hedge them and comeup in the green. Just trying to learn more. thanks.

HPT on 12:45 AM said...

Its a rough form of a pair trade. ER2 tends to underperform compared to the SP500, so when the market declines, you should make money. Same type of situation with the bond futures. ZF tends to rise more than ZB during stock market declines, (however hedges aren't perfect because of different tick sizes for each product).

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