HEDGE PLAYBOOK

Five strategies · Options-only · No naked shorts · No leverage

Strategy Selector

Risk	Strategy	Cost	Trigger
Tail risk (geopolitics)	XLE LEAPS Call (1-2yr ATM)	0.5-1%/yr	Middle East escalation, supply disruption
Oil position protection	WTI $75 Put (3mo rolling)	<1%	Oil allocation > 15%
Systemic vol expansion	SPY ATM Straddle (3mo+)	2-3%	VIX < 17 (cheapest insurance)
GOR mean reversion	Gold Put + Copper Call barbell	<2%	GOR in extreme zone
A-share systemic risk	CSI 300 Index Put	1-2%/quarter	A-share ≥ 10% + index > 4500

First / Second / Third-Order Opportunities

Order	Definition	Example
FIRST	Everyone sees the event. Everyone makes the same trade. Profit gone.	Oil up → everyone buys energy stocks
SECOND	The transmission chain others have not priced yet.	Oil up → chemical costs rise → pair trade energy vs airlines
THIRD	Structural consequences most people are not thinking about.	Oil up → Fed hikes → CRE defaults → short regional banks

First-order is crowded — skip it. Second-order is the execution zone. Third-order is where cognitive advantage converts (use <2% positions).

Red Lines — Never

#	Forbidden	Reason
1	Naked option selling	Limited upside, unlimited downside
2	Crude futures	Margin calls in volatility
3	Leverage > 1x	Survival > returns