Tom Preston Explains When to Hedge With VIX or SPX
Tom Preston and Chris Vecchio discussed hedging strategies using VIX calls versus SPX puts, explaining that SPX puts are suitable for protecting against a gradual market decline, while VIX calls are better for hedging against sudden, sharp crashes. They also detailed how ratio spreads work, using Apple as an example, and highlighted a risk associated with newer AM-settled index expirations.
Understanding the specific use cases for VIX calls and SPX puts allows traders to better protect their equity exposure against different types of market downturns. Knowledge of ratio spreads and new expiration risks can help prevent significant losses.
The hosts also touched on managing an Apple position, how ratio spreads work, and risks in AM-settled expirations.