The S&P 500 took 27 years to increase by $2,000 (going from $300 in 1990 to $2,300 in 2017). Just last week, the equity index notched another $2,000 in less than an eighth the time.* This exponential rise has been cause for uneasiness and questions among investors.
SPX S&P 500 Percentage Return
At the end of the day, no hedging strategy is perfect, and it’s your call to act in a way that’s both comfortable and effective. An $80,000 stock investment using short Small Stocks 75 futures (about $8,000 in size†) could be effectively hedged 10% per contract whenever the investor perceives risk. And futures allow for those managing risk to put on and take off hedges in almost any time frame without having to uproot the investment. There seems to be a reason for media outlets to call for a stock market crash every week. While those predictions rarely come to fruition, history does dictate that turbulence will set in at some point. It’s better to be prepared beforehand. *S&P 500 Index values between 1990 to present — © 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment. Source: https://www.danielstrading.com/2021/07/09/are-stocks-climbing-too-fastHow Should You Hedge?
†Value taken on 7/1/21
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