Hedge Hinders Profits

So I put the hedge on yesterday of puts on the S&P at the close. We had a good report from JPM as well as a jobless claims decline for the first time in a while. Stocks however did not explode higher on the open. We basically traded around up and down for a while until the after noon. I basically checked in on my positions, saw that not much was happening and stepped away for a while. I came back to the market breaking out and I had some decent gains but my hedge was losing money and really capping my gains. At that point I didn't think the rally would go much higher so it didn't make much sense to take it off and since it was still right at about my 2% loss limit and I had no other puts I decided to leave it on. Either way a gain is a gain, however I would have had 4x the gains without the hedge in place. A smart thing to do could have been to look and see what would have constituted a break out, and set a sell order at that point to close the position and let the rally go.

At this stage in the overall rally I am more inclined to keep a hedge on because we almost reached 875 in the cash market which was my target. Some of my positions continued to trade not as strong as I'd like but were mostly profitable for the day. We are reaching even higher into oversold territory which means we should have a decent pullback in the near future.

GOOG reported better than expected earnings but did comment on the tough times and the stock traded higher initially then reversed. I wish this would have happened tomorrow because it is a good day to day trade options since it will be expiration and GOOG just had earnings. The tough thing is the day may be very low on movement due to expiration and pinning. If C has decent results that could move the market higher as well as GE. My opinion is that a majority of this rally is done short term so I am less inclined to take risks to the upside. I will look for more specific put plays to balance out my bullish positions. What I would really like is an extreme up day tomorrow then balance myself out ahead of the weekend. A good filter for candidates I think would be those still below their 50 day moving average. Futures are currently down 5 points, we'll see how earnings go and how things react.

Total Return for 2009: 131%