Zeev's Turnips Patch-No Politics (ZEEV)

[hk2]

Maybe we're using the term hedge differently, but if I'm effectively short by selling a call contract, isn't my hedge a long position in the underlying? The reason I say this is because if I also short the underlying, then I'm on the hook for both the call delivery and short covering if the underlying goes up. I think this is right, but correct me if it's otherwise.

You are correct, I did mean you buy the underlying.

The way I see it is that if the stock has gone against me and my option writing position, what I should do is to use the premium proceeds to fund transactions shorting the stock. ...


You do not want to short for the reasons you stated above.


...If I short enough, I drive the price down.

That's assuming you have the ability to influence the market in a meaningful way and maintain that influence over time.


If I'm long in a downtrend, I need my hedging strategy to move prices up...

Here we may have a terminology issue. I understand a "hedge" to be an offsetting position to minimize losse when the price action moves against you. Not an attempt to influence the price action.