Buying Umbrellas Before The Next Rainstorm

Hedging market risk after Wednesday's rally.

Sunny With A Chance Of A Rain

Those of you who've been to Manhattan when it's raining will be familiar with the sight of people selling umbrellas on the street. You generally don't get the best prices on umbrellas on that situation - you're better off buying one in a store when it's sunny out and having it with you when it starts raining. Similarly, it tends to be cheaper to hedge market risk after rally.

The price of hedging against a decline in the market-tracking SPDR S&P 500 Trust ETF (SPY), was pretty low after Wednesday’s rally.

Screen capture via the Portfolio Armor iPhone app on 1/4/2023.

If the rally resumes today or Friday, it might be worth considering adding some downside protection here.

New Top Names Tonight

For those following our core top names strategy, I plan to post this week’s top ten names tonight. If you started last Friday, as I did, you’ll replace any of last week’s top names you got stopped out on with names from tonight’s list (I haven’t been stopped out of any yet); if you’re starting this week, you’ll buy equal dollar amounts of each of the top names on Friday and then add your trailing stops.