Short Index Positions as a Portfolio Hedge

[Lego_Man]

Hi guys,

I trade with ASB securities and am currently 100% long.

Rather than liquidate a large portion of my holdings to hedge against a correction i'm considering having the ability to take short Index positions when i feel the urge.

Does anyone else use this strategy? Who do you use as your provider? I am thinking of an opening an account with CMC markets.

Also, i have some USD lying around which i dont want to take the hit on converting back to NZD and using as an opening deposit. Since i'm planning to trade USD Index Futures it would make sense for me to keep it in offshore currency. Would they accept this?

[Footsie]

i think its easier to just cash in some profits.

you need to have a plan. what are yuo going to do if the market keeps going up and you start losing money on your short position? when do you cover?

CMC probably the easiest.

Futures trading with hedging or not has in the past resulted in me losing substantial amounts of cash.

[ananda77]

you need to have a plan. what are you going to do if the market keeps going up and you start losing money on your short position? when do you cover?
CMC probably the easiest.

Footsie is quite right here; you need a plan and definitely a plan that you have worked out before you enter any position (here is an example) that covers:

-you overall view of where the market is at -Your Bias- for example: ...SPX 500 in a Double Top set up (where are your indicators that back up such a bias; is your bias based on fundamentals or technicals; who else is agreeing on your bias)
-your trading strategy for example: sell SPX 500 index short *1085
-your initial target range for example: SPX 500 index *915 initially (at that stage you review)
-your stop loss for example: buy SPX 500 index long *1106

Kind Regards