I'm exploring the utility of CFDs for hedging an existing physical equity portfolio. Specifically, shorting an index CFD like $NDX to mitigate broader market risk. Does anyone here actively use CFDs for this purpose? Any pitfalls to be aware of?
Yeah, I use NDX CFDs sometimes for tactical hedges against my tech heavy portfolio. Works well for quick downside protection, just keep an eye on margin calls.
Interesting idea, but aren't the financing costs on CFDs quite a drag, especially if you hold them for an extended period for a hedge?
I'd be wary of the counterparty risk with CFDs, especially with smaller brokers. Something to consider if you're holding a substantial hedge.
I prefer options for hedging broader market risk. Less leverage involved and defined risk profiles. Have you looked into protective puts on an index ETF instead?
I've used CFDs for hedging specific sector risks within my long-only portfolio. It can be quite effective for short-term adjustments without liquidating positions.