You can just short SpaceX of an amount equivalent to its share of your SP500 holdings. You will have to pay borrowing costs though, but on something that liquid it will be very small.
So eliminating SpaceX exposure will cost you $100 per million of your SP500 ETF per year, or so.
Personally I would still probably go with the long put strategy unless the price difference is exorbitant.
The ETF is this case follows the index, so there's really no surprise.
> I would still probably go with the long put strategy
Just, don't. There is a world of complexity between a simple short, and entering an option contract with non linear pnl.
You are not entering a contract with a long put. You are buying a contract that, if you want, you can just let expire with no obligation to do anything. It's effectively simple insurance (as opposed to a short position, which is an actual liability, which will eat you alive in exceptional circumstances).
Yes you are, and options are complicated. Actually, the mere fact that you think they are "simple insurance" is enough proof to me that you probably don't understand it enough to safely buy one.
> You are buying a contract
Oh right, you've bought a PUT, now the fun part: you have to manage your position/exposure, could you enlighten me how you do that?
Could you explain me why buying a SpaceX PUT in a high IV regime (e.g. soon after IPO) will have it drop 40% when the IV decreases after 1 month, even though price moved in my favor? It should be simple, it's just a simple insurance product right?
Seriously. Someone, likely not super financially literate, ask a simple question about how to neutralize a stock exposure, and your answer is to advise buying options? Just stop.
Look, I think you're missing my point a little bit. Let's simplify it to risk, since that's what kicked off this conversation.
Your pension or whatever holds an ETF that (soon) contains some SpaceX shares. You buy a put option on SpaceX direct. What's the absolute worst thing that could happen?
Your pension or whatever holds an ETF that (soon) contains some SpaceX shares. You short sell a SpaceX share. What's the absolute worst thing that could happen?
Also there is no liquidity issue, we're talking SP500 names here, you'll pay GC, which should be around 25bps as the other comment mentions.
I think most people trade synthetic, just because it's faster and you don't have to wait for settlements, but maybe that is different if you trade onshore (I am a foreign investor).
Anyway if you are synthetic your margin is most likely shared between shorts and long on the same instrument, so no, you wouldn't be called.
P.S. Here's an example of S&P500 without the magnificent 7 https://www.defianceetfs.com/xmag/
I think it's less complicated than you'd think.. just buy LEAPS puts proportional to your exposure.
I'm very interested in seeing how the market prices these options after the IPO.
Sure you can make a lot of money but only if you know when to get out before the crash. And that's something that doesn't gel well with long term investment.
Long term dollar cost averaging is not about hype and fomo. Overall pricing in equities does vary according to alternative investment routes, which is why I'm diversified into those as well.
Stonks go up. Stonks go down. Averaging over decades, ownership is about owning a share of productive output of a large portion of our entire economy, an amazing restructuring of social relations that presents an amazing opportunity for the common person, unseen throughout the history of humanity.
Probably finding an ESG-focused ETF would do it. ESG basically meant "good governance, we follow laws" which translated into better governed public companies that therefore had better returns, as one would expect. Really weird how it was politicized into something entirely different...