U.S. Asset Management

hedge fund

Smart Money Indicator – Hedgers Combo

By David Cross, CPM®, CRPC®, CDFA®

By David Cross, CPM®, CRPC®, CDFA®

David.Cross@us-am.com

One of the tools that we find helpful is a short-term indicator that reflects protective put option positions of large commercial hedgers in the S&P 500, Nasdaq 100 and DJIA futures. Put options are instruments used to help hedge against declines in stock values.  Commercial hedgers are large institutions that are generally regarded as the “smart money”.  These are the firms who typically manage portfolios in the billions of dollars. The indicator seeks to reflect the dollar value of these large commercial hedgers’ positions. The chart as shown below is a one-year stochastic of this data with the S&P 500 on top. If the indicator reads 100, then it means hedgers are the most exposed they have been in at least one year.

The Hedgers Combo chart tends to be well correlated to the stock market.  A reading above 80 indicates that large commercial hedgers are exposed to the potential upside of stocks and are holding few hedges. Conversely, readings below 20 show pessimism on the part of large investors because they are holding a large number of hedges to protect their portfolios from market declines.   Readings below 20 are usually a negative sign for stocks.

Sources: SentimentTrader.com & the Commodity Future Traders Commission (CFTC)

Investing today requires a customized financial plan integrated with a well thought out investment approach. If you have questions about how to invest or which investments may make sense for you, schedule an appointment by clicking this link or contact us today at david.cross@us-am.com or 678-894-0697.

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  Financial data changes rapidly.  All economic and performance data is historical and not indicative of future results.  This material is of a general nature and intended for educational purposes only.  This information does not constitute a recommendation or solicitation or offer of the purchase or sale of securities.   Indexes are unmanaged and do not incur management fees, costs, or expenses.  The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.  It is not possible to invest directly in an index. 

David Cross is a wealth advisor with U.S. Asset Management, a Registered Investment Advisor. He holds the designations of Certified Divorce Financial Analyst, Certified Retirement Planning Counselor and Certified Portfolio Manager.

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All views/opinions expressed in this article are solely those of the author and do not reflect the views/opinions held by Advisory Services Network LLC.  Advisory Services offered through U.S. Asset Management, a member of Advisory Services Network, LLC.

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U.S. Asset Management is a fiduciary advisor offering portfolio management and financial planning services. We help clients make better decisions with their money and assist with overseeing every aspect of their financial lives.  David Cross is a Certified Portfolio Manager, Certified Divorce Financial Analyst and Certified Retirement Planning Counselor.

U.S. Asset Management and Advisory Services Network, LLC do not provide tax advice.  The tax information contained herein is general and is not exhaustive by nature.  Federal and state laws are complex and constantly changing.  You should always consult your own legal or tax professional for information concerning your individual situation.

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  Financial data changes rapidly.  All economic and performance data is historical and not indicative of future results.  This material is of a general nature and intended for educational purposes only.  This information does not constitute a recommendation or solicitation or offer of the purchase or sale of securities.   Indexes are unmanaged and do not incur management fees, costs, or expenses.  It is not possible to invest directly in an index.