Our core market indicators continued to improve this week allowing us to increase our long exposure and reduce our hedge. We are currently 70% long and 30% short. The increase was fairly rapid as it appears more market participants are joining this rally.
The long portion of the portfolio consists of stocks we want to own due to many factors including; individual company growth prospects, value, and beta. Our current short is simply a short of the S&P 500 Index.
The current hedge ratio is .43.
The green lines on the chart above represent us adding longs to our portfolio and reducing shorts. The yellow lines represent increasing short positions and decreasing our portfolio of long stocks. The red line represents aggressive hedging with instruments like puts, volatility, or actively managed short funds.