Any thoughts on some put options to buy? I might throw a very small % of my Roth into puts just to hedge from a potential recession.

I’m kinda skeptical about the economy in the next few years. Please let me know if my thinking is incorrect as I didn’t study economics in college / dont have greatest undertaking of macro.

Ok so this is where I see problems:1) the yield curve is inverting which is a great indicator of recession. Only odd thing is it’s inverted moreso in the near term and not slanted like past times prior to recession where short term rates were high with a fairly steeper decline toward longer term rates.

2) interest rates are still low and the fed wants to lower rates??? I feel the fed kinda goofed (again here I don’t understand Econ so this could be incorrect). I would have expected interest rates to be increased slowly years into this bullish run but it never really happened. Now the fed wants to lower interest rates at the potential end of a bullish market? Something makes me think this could be very bad as the fed isn’t going to have the ability to hand out free money if we ever do delve into a recession. Going from say an I rate of 5 to 1 is a lot more likely to stimulate vs going from 2-1. Maybe interest rates are just going to stay historically low from now on?

3) The unemployment rate is extremely low in the US. Hmm I just don’t say how this can improve. Basically with unemployment, I can’t see the % going lower and actually feel when we start to go up in unemployment.... watch out for a recession. It’s not like we can go to 0-1.5% unemployment so I think it’s just a sign we are at the end of a bullish market.

FYI I’m super pessimistic. My thoughts may be stupid and incorrect.... however I just feel we are due for a recession sooner or later. Honestly it doesn’t really bother me bc I’ll just keep buying and get everything cheap in my rtmt accts. The only thing that worries me is losing money in my Roth which I plan to use as a house down payment sometime in the next 3-4 years.

Having seen one leg of the thesis in the Netflix thread confirmed, for the scenario in the OP I would personally buy:

- 2/3 June 2020 Netflix $200 puts for $5
- 1/3 Jan 2021 Netflix $200 puts for $10

These will pay 3x+ in a correction like last year's, 10x+ in a bear market caused by a recession, and have a thesis of their own besides (Disney causing growth retraction in this overinflated stock which has run up on endless growth) which will pay all by itself.

If you are worried about losing money then don't go buying options, most expire worthless. NFLX may be a short, but imo options are terrible for a roth as you are risking limited capital that can instead compound for decades.

If you are super paranoid about a crash, find stocks with good dividends that are more recession proof than others. Seeking Alpha has plenty of articles on the subject.

Thanks for feedback. Yea I’m not going to play options at all bc it’s kinda pointless and not something I know much about. I’m currently just invested in etfs that have pay monthly dividends.... and keep reinvesting when I’m paid. I honestly don’t consider my Roth a retirement account bc I’m just going to dip into it when I buy a house. My 401k is my only true rtmt account now until I buy a home in which case I will start treating my Roth also as a retirement/ last ditch safety fund.

Here is the official ms recession playbook

https://www.docdroid.net/5reJGOA/mstrp.pdf

It's been scanned as clean, but docdroid loads in browser and doesn't allow pdf executables anyways

Any put will 3x if you guess right, any tech put will 10x if you guess right on the recession timing. Come on. That's like saying buy calls on a stock whose earnings will have a 2 s.d. surprise to the upside. It's easy if you guess right.

Not a single person at BFI/2p2 is beating the professionals in the options markets over time with a statistically valid sample. The bid-ask spread is typically huge on deep OTM, the vig and fees and commissions are bad, and taxes are a huge hurdle on top of all that.

If you think you are, you've been fooled by randomness.

Anyone saying the subprime crisis was easy to forsee prior to 2007 is FOS unless they made $tens of millions - billions at it.

Dr. Burry was ~one quarter away to losing 100% of his clients' money on his subprime trades.

VIX went from $11 to $87
SPY dropped 25%, IWM or IWC fell more, puts would have crushed.
Puts on high yield would have also worked well.

Gold has performed well since summer when fed started QE but about flat since March 1. Gold story probably plays out over next few years.

Of course i didn't have any of these hedges on heading into March. The red flags were definitely here, inverted yield curve, fed restarting QE, funding stresses in the repo market last fall, and then the virus comes in Dec/Jan/Feb. Lots of smoke, all obvious in hindsight, oh well.

TS's TLRY put recommendation was definitely spot on. That would have crushed.

Well, to be fair while TLRY made 400%, my recommendations are only about +100% overall so far.

Apart from TLRY (which was a no brainer) I recommended Amazon and Netflix Jan/June 2021 puts as crash protection. They were excellent recommendations for a market correction/recession, but we hit the 1/1000 runner runner out: 3 billion people are locked down in a pandemic and Amazon and Netflix are the two companies with soaring sales as everyone buys streaming and shops online. They both might still pay well when the lockdown ends and the boost disappears and nothing is left except declining revenue and profit in a recession. You've basically got a freeroll + profit locked already from TLRY

A good example of why you need to diversify a little, even in with recession protection.