{"id":1948,"date":"2025-11-26T16:10:16","date_gmt":"2025-11-26T16:10:16","guid":{"rendered":"https:\/\/diegogarciadelrio.com\/?p=1948"},"modified":"2025-11-26T16:45:02","modified_gmt":"2025-11-26T16:45:02","slug":"reactivating-a-smart-hedging-strategy-with-options-on-leveraged-etfs","status":"publish","type":"post","link":"https:\/\/diegogarciadelrio.com\/en\/reactivating-a-smart-hedging-strategy-with-options-on-leveraged-etfs\/","title":{"rendered":"REACTIVATING SMART HEDGING: LEVERAGED ETF OPTIONS STRATEGY"},"content":{"rendered":"

At different times in the market cycle, where (healthy) corrections exist, I have always used the same strategy: <\/p>\n\n\n\n

Protecting my exposure by buying calls on index-linked and leveraged ETFs<\/strong> when I detect an imbalance between volatility, momentum and correction risk. I have already used this methodology and, given the current conditions, I have implemented it again<\/strong>, and will continue to do so.<\/p>\n\n\n\n

On this occasion, and after the recent slight correction, the approach is the same, calls OTM with strikes 8-10% above the underlying<\/strong>, and in this case as a position SPXL 220 JAN16\u201926 <\/strong>(again if I remember correctly). The objective is the same as in previous cycles, to maintain participation in a possible upward leg<\/strong> while limiting the risk to the premium and I retain flexibility<\/strong> to reopen exposure in futures, which I already did, averaging futures and earning some profitability on this trade.<\/p>\n\n\n\n

What sets this strategy apart, and the reason why I repeat it and will continue to do so, is its asymmetric structure, a fixed risk from the outset, open upside, and time management based on renewing the position before entering the critical loss of value zone<\/strong>. This simply focuses me on acting systematically, avoiding unnecessary premium deterioration and moving exposure to maturities where convexity is more efficient, or moving directly to futures.<\/p>\n\n\n\n

Through ETFs such as SPY, QQQ, SPXL or TECL, because I can replicating the market bias<\/strong> without bearing the full directional risk. If the market continues to rise, the option accompanies me, if a certain correction is confirmed, the loss is contained and allows me to return to my futures positioning from a more advantageous level<\/strong>, exactly as I did in the previous run.<\/p>\n\n\n\n

I show you the performance below.<\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

LONG OPERATION: SPXL STK 220 VTO 16\/01\/26<\/h2>\n\n\n\n

I resume the long strategy on SPXL STK 220 at maturity 01\/16\/26<\/strong>, I have already implemented this structure in previous phases of the market and it has delivered consistent results under the same risk and time management framework.<\/p>\n\n\n\n

On this occasion, I obtained the following returns from this operation:<\/p>\n\n\n\n

- First time:<\/strong> Entrance to 1.23<\/strong> and output to 1.79<\/strong>, with an approximate yield of +45%<\/strong>.<\/p>\n\n\n\n

 - Second time:<\/strong> Entrance to 12.49<\/strong> and close in 16.26<\/strong>, equivalent to a return close to +31%<\/strong>.<\/p>\n\n\n\n

<\/div>\n\n\n\n
\"OPERATIONS
Source: In IBKR: Operations > Transactions <\/em><\/sup><\/figcaption><\/figure>\n\n\n\n
<\/div>\n\n\n\n

Both operations share exactly the same logic, risk limited to the premium, sufficient convexity to capture moderate upside legs and systematic rollover of the position before entering the downside zone.<\/p>\n\n\n\n

If you would like to know more about the complete structure of this methodology, why I repeat it and how I manage it, please see here<\/mark><\/a><\/strong>.<\/p>\n\n\n\n

<\/div>\n\n\n\n

SHORT OPERATION: SPXS STK 40 VTO 16\/01\/26<\/h2>\n\n\n\n

Rethinking my tactical strategy once again with a short position with SPXS STK 40 at maturity 16\/01\/26<\/strong>, This is exactly the same structure that I have already used in similar scenarios to capture movements but this time in short.<\/p>\n\n\n\n

In the trade with the same configuration, I was able to take advantage of the volatility phase and close the trade with the following performance:<\/p>\n\n\n\n

Entry at 2.15 and exit at 3.10<\/strong>, equivalent to an approximate yield of +44%<\/strong>.<\/p>\n\n\n\n

The logic of this structure is not simply to replicate the previous trade, but to use it again in a context where the relationship between momentum, implied volatility and probability of correction is once again favorable. SPXS, as a leveraged inverse ETF of the SPX, allows a bearish tactical view to be expressed without the need to resort directly to futures or directional shorts that require margin, with potentially unacceptable losses.<\/p>\n\n\n\n

With a long maturity and a strike selection capable of accompanying the gamma convexity, with the position I seek to capture a potential tightening movement while keeping the risk circumscribed to the initial cost. If the market confirms a correction, the convexity accelerates the impact on the premium, if it does not, the loss is limited and the repositioning plan remains intact (with futures, as mentioned above).<\/p>\n\n\n\n

Whoever wants to review the complete functioning of this methodology, again, can go into more detail. here<\/mark><\/a><\/strong>.<\/p>\n\n\n\n

<\/div>\n\n\n\n
\"OPERATIONS
Source: In IBKR: Operations > Transactions <\/em><\/sup><\/figcaption><\/figure>","protected":false},"excerpt":{"rendered":"

En distintos momentos del ciclo de mercado, donde las correcciones (sanas) existen, siempre he utilizado la misma estrategia:  Proteger mi exposici\u00f3n comprando calls sobre ETFs indexados y apalancados cuando detecto un desequilibrio entre volatilidad, momentum y riesgo de correcci\u00f3n. Esta metodolog\u00eda ya la utilic\u00e9 y, dadas las condiciones actuales, he vuelto a implementarla, y seguir\u00e9 […]<\/p>\n","protected":false},"author":1,"featured_media":1954,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[32,13],"tags":[],"class_list":["post-1948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rendimiento-de-operaciones","category-markets-by-diego"],"_links":{"self":[{"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/posts\/1948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/comments?post=1948"}],"version-history":[{"count":5,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/posts\/1948\/revisions"}],"predecessor-version":[{"id":1961,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/posts\/1948\/revisions\/1961"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/media\/1954"}],"wp:attachment":[{"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/media?parent=1948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/categories?post=1948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/diegogarciadelrio.com\/en\/wp-json\/wp\/v2\/tags?post=1948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}