---
title: 'Dr. Jim Says Long Puts Are the Worst Hedge You Can Buy. Here''s What He Uses.'
source: 'https://youtube.com/watch?v=ya4OUePfNn0'
video_id: 'ya4OUePfNn0'
date: 2026-08-07
duration_sec: 435
channel: 'tastylive'
---

# Dr. Jim Says Long Puts Are the Worst Hedge You Can Buy. Here's What He Uses.

> Source: [Dr. Jim Says Long Puts Are the Worst Hedge You Can Buy. Here's What He Uses.](https://youtube.com/watch?v=ya4OUePfNn0)

## Summary

In this video, Dr. Jim ranks his top four hedging strategies from least to most favorite, arguing that traditional methods like long puts and long VIX calls are often expensive, difficult to manage, and can be a drag on portfolios. He ultimately advocates for position sizing on entry as the most effective 'hedge,' emphasizing the importance of staying small with trades to build a sustainable strategy.

### Key Points

- **The universal desire to hedge** [00:14] — Everyone, regardless of experience, wants to know how to hedge their portfolio against adverse market moves.
- **Long puts are the least favorite hedge** [00:45] — Long puts are popular but have three main problems: they are expensive due to implied volatility skew, it's difficult to know when to exit, and they can be a drag on the portfolio during positive drift.
- **Long VIX calls are also problematic** [02:59] — Long VIX calls suffer from similar issues as long puts, including high cost and slow deterioration. Additionally, the VIX can be 'archaic' and sometimes not tradable at the exact moment of crisis, as seen in August 2024 when the VIX spiked to 65 but options didn't open.
- **Short delta as a hedge** [04:32] — Short delta can be attractive for hedging a short premium portfolio because when volatility expands (hurting short options), the market often drops, and short delta profits. However, holding short delta indefinitely is not advisable due to positive drift.
- **Position sizing is the top hedge** [05:50] — The number one favorite 'hedge' is position sizing on entry—staying small with trades, typically 1% to 3% of the portfolio for fine risk strategies. This approach allows flexibility to add other hedges or none at all, and it's key to building a sustainable strategy.

### Conclusion

The most effective hedge is not a complex options strategy but disciplined position sizing, which provides flexibility and sustainability. While it may limit upside, it's a trade-off worth making for long-term success.

## Transcript

the best ways you can help us are by liking the video or subscribing to the channel. Either one of those guys really helps us out a lot. Okay, so everybody wants to know how do I hedge my portfolio? Everybody wants to know this.
been in the market, how, you know, short you've been in the market, whatever it's years or you just got started, you know, 19 minutes ago. Everybody wants to know, man, how do I hedge against the big move against me? So, that's what I want to
talk about here today. I want to rank my top four hedging strategies from my least favorite to my most favorite, and so let's go. So, hedging option number four. This is my least favorite of the bunch. Long puts. Now, this is what most
people utilize in the options world when it comes to putting on some type of, you otherwise long portfolio, because it makes sense, right? If I buy out of the money puts in SPY or QQQ's in broad, you know, market-based index, whatever. If
the market does go down, then those puts are going to print. If the market goes down, then they'll uh those puts are certainly going to help. That's true, but I think there are at least two problems with using long puts as a
hedging strategy, or maybe three problems, now that I think about it. So, number one, puts are expensive. So, puts, the prices on puts get bid up because of the implied volatility skew, and the volatility skew that's in the
equity indexes. So, you're going to have to pay a pretty penny for those hedges. that's fine. I don't really care. I just want the hedge in place." That's okay. I mind, of course, and make your own decisions, but just understand you are
paying top dollar for those puts. The second problem that I have with long puts as a hedging strategy is it's going to be difficult to know when to get out. know, all right, like when is enough enough? Like, the market's in free fall,
helping out, whatever. It's going to feel sort of amazing, maybe not super portfolio is getting absolutely rinsed. But the puts portion of the portfolio is do you when do you cash it in? When do you say, all right, this is what I was
going for on the hedging mechanism? Some people have a clear plan. It's a little bit more muddy, in my opinion, when it comes to using long puts as a hedging third reason why I don't really love long puts is because a lot of times
lot of times as the market goes higher or the market goes lower or the positive drift just kind of takes over, those puts are going to be a drag on your portfolio. Now, in all fairness, a lot of people will hear that or see that or
yeah, but Jim, that's what I want. It's just like when I buy a house insurance. fire insurance. It's just like when we buy car insurance. I don't want to use kind of want to flush it down the drain. And that's fair. I think that's fair.
they're signing up for. They're okay wasting it, then that's absolutely totally fine, of course. But I think there's a better way. And of course, boy needs that watch time. Okay, so that's number four. Number
three, long calls in the VIX. So long VIX calls. These suffer from some similar problems to what we saw with long puts. I mean, long VIX calls are also expensive for kind of similar reasons that long puts are expensive in
situation where volatility, generally speaking, is grinding lower. So that's any long VIX calls that you might have. There's going to be kind of a slow deterioration over time. But then there's actually another issue that I
think can be problematic with something like the VIX. You know, sometimes the VIX is a little bit um archaic, I guess. It's a little bit maybe uh out of date, I suppose. And so there are times when, like last August, or that'd be two
Augusts ago now, so August of 2024, when the VIX shot up to 65, volatility futures only got up to like 40 or 42 or something, but the VIX index shot up to 65. And in the morning, when the market opened and everybody holding in their
VIX calls was like, "This is it. This is the day I've been waiting for." Well, because the VIX didn't even open. Like, the VIX was not tradable for like 20 or tradable, but the options themselves were not even open. And so, you run into
a situation where because there was kind of a snafu at the exchange level or the you didn't even have you didn't you didn't even have a chance to get out. There wasn't even a way to cash in on the profits of that position. And so,
that's why, you know, a long put is probably a little bit maybe maybe a but this is not really like a four and a three. This is more like a, you know, a 3B and a 3A type of situation. I don't really like either one for all the
through. Okay, so number two, now we're really getting somewhere. Short delta. That's right. I said it. Playing the market to the short side. I know, that's crazy talk. I know the market's never
This time is different. Like, I got it. I'm on the internet, too. But, when it comes to hedging against an otherwise short premium portfolio, which to have, short delta can be really really attractive. It's really
attractive because when volatility expands and volatility is on the rise, that's going to hurt your short premium positions. That's going to hurt any short options you have on because those are all negative Vega trades. And so,
those. But, oftentimes when volatility does expand, the market will be going down. So, the short delta will kick in the short premium portfolio. But, understand there's a give me, there's a
gotcha, right? And so, yes, I mean, holding short delta indefinitely into the future, maybe not necessarily the play since negative drift is not really a thing. But, from time to time having short delta in your portfolio, or at
least having dynamic short delta like in way of like short options or short call spreads or what have you, it can be a really really nice way to hedge against an otherwise short premium portfolio. And my number one, my number one
favorite hedging strategy isn't even really a hedging strategy. My number one favorite hedging strategy is position sizing on entry. My number one favorite hedging strategy is staying small with your trades. So,
with the fine risk strategies, this is typically somewhere between 1% and 3% would like to go even smaller than that and that of course is totally fine. With Again, you can go even smaller than that if you want to, but this is a good
about being small with position sizing is it opens you up to do whatever else you want to do. You can do anything else that you want to do. You can layer on the long puts. You can layer on the long vix calls. You can add short delta. You
don't have to add any additional hedges on top of that either if you don't want to. When you are small on order entry, it just changes the game so significantly. Now, again, it's gimmies and gotchas, right? And so, there are
some significant gimmies with being small, but the gotcha is now you're not significant profits when things work out. But personally, when it comes to it comes to wanting to build something sustainable, I'm okay making that trade.
being small on order entry. That is my number one favorite hedging mechanism and we'll see you guys in the next video.