Monday, June 25, 2012

06/25/2012 on second thought... (pre-market)

On some further analysis, a partially hedged position has a better reward/risk ratio – especially in bear market sector configurations:

I am cancelling my order to cover the XLK short and to buy XLF.

Right now the model has been fully hedged, but in bear market configurations a half hedge is sufficient: approximately 50% of the long positions.

It’s not EXACTLY 50%, but I’m not going to do the math this morning.

I am still planning to exchange PDLI for FCX, as long as they don’t gap away from each other.

Just to clarify a bit...

The hedged model isn't exactly calling for 50% short XLK, but rather 55% short XLK and 10% long XLF (in addition to 100% long the fundamental selections).

The problem is that the long and short percentages adjust both by the state of the market AND by the state of the account.

The question is, what's the best way to PRESENT this on the blog in a tradable manner? Do I actually present both long and short margin positions, or just the net difference, which would be 100% long ten stocks and 45% short XLK (55% short - 10% is 45% net short).

AND I'm on vacation! Not the best time to do a bunch of changes.

So, eh, 50% short XLK is close enough for government work (as my old father in law used to say...)

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