We have decided to “delta hedge” up our portfolio. This insurance comes with a cost. However, it does also offer profit potential if the market declines. Our current SPY beta weighted delta = 0.22. So, we bought a put spread in SPY that has -0.22 delta to offset the portfolio. Basically this moves us to a flat overall position. If markets go higher, hopefully our share gains outpace the market move but the SPY put spread would be expected to lose money. If the market goes lower, hopefully our shares hold up relatively well. But the SPY put spread will make some money to offset some portfolio losses. The details are shown below:
Buy to open: SPY Oct 18th (monthly) 552.00 strike put
Sell to open: SPY Oct 18th (monthly) 529.00 strike put
Debit: 5.50
Max risk = 5.50 or $550.00 per spread
Max reward = 17.50 or $1,750.00 per spread
In addition, one more note on our SNAP position. We traded a 1×2 put spread. So, while our lower strike puts have exercised early and we currently own 200 shares. We still own the higher strike long put. That gives us the right to sell 100 shares at 13.00 per share over this weekend (that will happen automatically). So, after this weekend is when everything will shake out and we will end up owning 100 shares. We sold the covered call earlier against that 100 share position.