Posted by: jhamon | March 12, 2010

MysteryHedgie: A Twofer

Since the November lows in the US$ the small cap US Russell 2000 has roared ahead, most noticeably against the SPX, the large cap Index whose constituents export more and are therefore more adversely impacted by a rising $ than Russell 2000 names.

The correlation between the US$ and the IWM/SPY since the 11/26 lows has been very noticeable…

While we believe the $ will continue to move higher as 2010 progresses (PIIGS won’t fly), the ongoing “positioning pause” is likely to last awhile longer. If you are considering hedging your $ exposure or equity market exposure more broadly…

Monday is the Ides of March, we think equity hedging is a very wise choice at this (potential turning) point… sell IWM/buy SPY (like all other options right now, IWM puts represent excellent value in the March 31st and April expiries)…you get two hedges for the price of one……

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