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ETFs vs Stocks With a Hedge

SPHBsectors

Yesterday my market risk indicator moved back to positive territory. It’s looking like price above 1975 on the S&P 500 Index (SPX) is roughly the level where the risk indicator clears so you can use that level for planning during the week. If the readings can hold into Friday it will clear the current market risk warning. If that happens it will result in the Volatility Hedged portfolio going 100% long (for official tracking purposes I use SPX for the longs). The Core Long/Short Hedged portfolio will remove the aggressive hedge (mid term volatility) and replace it with a short of SPX (or using SH). The longs for the core portfolio are stocks that should outperform the market during an uptrend (high beta stocks). As I mentioned above I use SPX for tracking the Volatility Hedged portfolio, but I personally use high beta stocks with that strategy. Recently I’ve been asked if an ETF can be used for the long portion of the core portfolio rather than stocks. The answer

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