This market won't go straight down, so it's a good move to take something off of the table. If you hedge with puts and levered inverse ETF's definitely sell some when you get a day like this- these instruments do very well with high volatility but if the market decides to rally they will get crushed. If you purchased puts that expire in less than 30 days its a good idea to roll them up and out to an expiration further in the future. For example if you had the DIA 118 put (expires in 18 days) you may want to sell it for 2.30 and roll it to a DIA 100 strike that expires in 46 for .30 cents. This accomplishes a few things, you cash out a nice amount of change and you still have some protection for a much long time period. Remember the DIA 100 put doesn't need to go in the money for it to rise substantially in value.
There was one thing holding the Market in place last week, the prospect (hope) of a good deal getting done, instead, we got bupkis. In truth, there really wasn't a good deal to be had, there was no mention on jobs nor stimulus, all we learned was that things were worse off than we imagined, and that message above all others was the one we all took from Washington.
What not? Sell some shorts, but don't sell them all. I wouldn't go all in this market, but if you must go long, try to do it incrementally. Selling a put to enter a position while volatility is a decent strategy, but i would make it a vertical put spread- that means go long an OTM put (one transaction) just in case that stock continues to tank.
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