Need help with hedging the stack

Joflax

After many years of sleeping well at night knowing I have accumulated a little stack and watching it soar in value over the past year,I am suddenly not sleeping well and feel like I need to protect my profits.
Anyone have any idea how much ZSL to hedge one ounce of silver and how much GLL to protect profits on 1 ounce of gold
Does it make any sense to buy these paper instruments?

derryb

Beware of ZSL. While I have been very fortunate and lucky with AGQ, ZSL has burned me every time i touched it.

Why hedge the stack? Up 50% and down 50% at the same time means you made no profit (or loss). If you are afraid of a loss on the stack the best way to hedge is sell some of it at a profit. These are times when one says "all in."

Edited to add: While I steer clear of ZSL in a bull market I would not hesitate to jump on it in a clear, bear market. My mistake was trying to play it on dips in a bull market. Nothing wrong with making money in both market directions, just don't bet AGAINST the trend with leveraged trades.

KUCH

derryb,

I agree, I'm "all in"

storm888

SHORT positions in both GLD and SLV are valid hedges.

You can insure your profits on a portion of your physical stash
and let part of it ride uncovered.

If the metal starts to run too far against your hedged position,
just cover the hedge fast. You can use loose STOPS or, if you
are usually at your machine, cover manually.

Your only naked exposure to the hedge is at night and during
the weekends.

Obviously, there are more "sophisticated" ways to hedge a
big stash, but GLD/SLV work just fine.

roadrunner

I tried some hedging twice with ZSL and also got bit both times. In each case I was "sure" silver was headed down...my charts said so and so did my "gut." After all, it had come too far too fast. I believe those points were around $20 back in August, and then $31 just recently. In each case silver ran well above those levels. Had I not gotten out of ZSL by the next day, vs. hanging on, my losses would have been 40% and 60%. Yeah, some hedge. ZSL is a widow-maker other than for a one day trade. The pros use it to fleece the sheeple. It works.
They can run me out my ZSL, but not my physical.

One can hedge your physical silver. But I figure my hedge is that within the next 1-5 yrs I'll be looking at $100-$200 silver. $35 won't look so high at that point.
The most I've ever paid for an ounce is about $21. So I sleep well enough knowing it's probably never going back there again. Fortunately, I have a few ounces back in the $5 to $12 range to offset that.

roadrunner

calleocho

You want a way to "lock in" the profits you already made ...but you also want to hang on to your stack just in case it keeps going up?

I dont know if you can have it both ways.

Why dont you just sell some ?

Baley

sell a portion at a time until you can sleep well

storm888

Selling part of your physical stash is not the best
solution.

Holding firmly onto the physical AND hedging with
GLD or SLV is easy and it keeps you fully in the
game when/if a nice run starts......PLUS gives you
some insurance on your current profits if the
metals tank BIG.

Just watch the hedge and cover it if you see any
sign of a BIG move up.

I, personally, would not hedge more than 50% of
any stash at these levels; prolly less than 30%.

Remember, the hedge is to protect against BIG
downward moves. No need to panic and cover
too soon when the metals just move up a little.

If you get trapped in a hedge, you can always add
to the position rather than covering in a panic; a
downward move WILL come along and rescue you,
eventually.

gsa1fan

Personally, I think of my "stack" as a hedge of any other investments

jmski52

The reason that physical is smart is because you have to do more than hit a computer key in order to add to, or subtract from your position. In other words, you must engage some brain cells and move body parts to do a transaction. That is a good thing, imo.

I think that paper hedging is just another way of complicating your money management beyond what is necessary, especially when the price of training is a few paper cuts.

If you aren't sleeping well and you know that it's because you have too much precious metal, start selling it. What will you do with the proceeds? That's a reasonable question.

ttown

<< <i>Personally, I think of my "stack" as a hedge of any other investments >>



Me too, I'm trying to diversify out of the system where most of my money sets in several 401k's.

Joflax

Have to admit I "chickened" out today and bought ZSL at 19.65 . Have a stop at 18 , I dont know what to hope for???

storm888

<< <i>Have to admit I "chickened" out today and bought ZSL at 19.65 . Have a stop at 18 , I dont know what to hope for??? >>



////////////////////////


I will be surprised if ZSL is not below $15 before May 1.



Sometime after May 1, a serious downward correction
in the metals could happen, but it is certainly not
guaranteed.

SMALL hedges are ALWAYS great insurance.

BIG hedges are very dangerous when frenzied peasants
are still lining up to buy.



....................

A common mistake with hedges is to keep them fully in place
AFTER they have become very profitable.

For example, if silver tanked to $25, you would wanna take
the profits from your ZSL and just watch the action for a bit.
When you like a settled number, you can then use those profits
to increase the physical stash. (Repeat the process as required.)

Good Luck!

morgantype

<< <i>

<< <i>Personally, I think of my "stack" as a hedge of any other investments >>



Me too, I'm trying to diversify out of the system where most of my money sets in several 401k's. >>



I concur wholeheartedly!

Also per the OPs dilemma.

Obviously the question is what are you going to spend the profits on?

I vote for converting to gold! (somehow this doesn't really help the situation though)

CaptMorgan

The bigger my stack gets, the better I sleep at night, ever at current prices to buy.

piecesofme

I think that paper hedging is just another way of complicating your money management beyond what is necessary, especially when the price of training is a few paper cuts.

1000%

delistamps

<< <i>Personally, I think of my "stack" as a hedge of any other investments >>



That's my philosophy.

Downtown1974

<< <i>

<< <i>Personally, I think of my "stack" as a hedge of any other investments >>



Me too, I'm trying to diversify out of the system where most of my money sets in several 401k's. >>



Thats what Im doing also. My dilema is trying to figure out how much cash I want to leave in my savings account. What used to be an 8 month emergency fund has turned into a 6 month emergency fund, and that is without making any withdrawls.

RedTiger

The short answer is "no" it doesn't make sense to mess with the inverse ETFs for a person in this situation.

I agree with the others, sell down to the sleeping point, preferrably a little at a time if that doesn't mean big transaction costs. If a person has a big stack, I suggest selling 5% or 10% next week and keep doing that every week until that person is sleeping well again. Most of the point of owning physical is sleeping better at night. If a person has so much it is having the opposite effect, it is time to sell some.

Hedging is best for traders, or industrial miners producing metal, or jewelers that need metal inventory to operate. It would tend to be an unnecessary complication for those stacking physical for the long term. The taxes become much more complicated, as does the math and the rebalance when markets move. These are strings that stackers tend to want to avoid. Simple is often better, and selling a bit is so much simpler than hedging.

Bear

Just remember, a hedge is often trimmed. Unless you truly are nimble and adept,

you are up against professionals w2ho fleece amateurs for a living.