A Bear with No Hedge

By Roger Nusbaum | October 09, 2008 | 11:10 AM | 0 Comments

I'm a bear with no hedge.

I sold the last of my ProShares Double Short S&P 500 ETF (NYSE: SDS) when the market was just about flat this morning. I sold half my SDS at SPX 1150 and so this was the rest of it about SPX 986.

The logic is simple, after a drop of about 30% (26% on the first lot and 37% on the second lot) you need less protection. Along with the sale of SDS I sold a tech name for a tax loss and to offset a little of the possibility that the SDS sale turns out to be wrong. Today's trades take my cash level to the high 30's.

I would not consider myself a true bottom caller and despite so many people that are hopeful of a bottom I have to think that at a minimum after such violent selling there is a rally of some sort (bear market rally, the real thing, whatever) and I think I might get a chance to put it back on at a higher level.

Bear markets are difficult one way or another. The market has moved down since executing the trade so we'll see what happens here but selling exhausts at some point and I doubt this will be different.