Handling discomfort

It's been awhile since I thought in terms of hedging a long position. I'm not a short kinda trader, not at heart. But back a year or so ago, when the Flash Crash had most traders hanging by our scrotums for an entire day, I was willing enough to counter my long position in AAPL by opening a small position in VXX. To my surprise, it worked nicely. As AAPL cascaded down with the market, VXX rolled up, and that little position kept me net even (almost) for the day before I sold out of it.

I've come to completely distrust VXX for most situations, particularly as an overnight hold. But this week, with the volatility and schemes behind the scenes of silver and oil, has me searching for a more comfortable way to approach the market. An approach that goes beyond simply sitting out entirely, which I did for most of the week.

Below, a look at QID, SLW and UCO as adopted 'hedges' against a long position in AAPL.

AAPL vs. QID, SLW, UCO

5-day, 15-minute

Simply shorting the QQQQs via QID isn't much, but it's better than no hedge at all. With AAPL constituting 20% of Nasdaq, a small amount of QID wasn't a bad way to handle discomfort. 

But as oil goes up, equities go down, and that made UCO and other ultra-bullish oil plays remarkable counter strategies. Silver is another way to deal with the noise if you can believe that the market is extremely lacking physical silver, which means short parties will go up in flames and the squeeze will be gargantuan. As the dollar disintegrates, precious metals zoom higher, and silver has a lot of catching up to do in relation to gold. 

I missed the majority of the silver run, but that is immaterial now. Where does silver go from here? Will JP Morgan snag the rug out from under the buyers of silver stocks/ETFs? Will the Fed prevent any potential default of Comex? What does it mean for holders of SLW? 

Means little to those who own physical silver. For the rest of us, the questions remain. One answer, for me anyway, is to relive discomfort by hedging.