Dwdonhoff:<<<1) "unhedged-long" -- Implies that there is such a thing as a hedged long position. There isn't. >>>"Of course there is, and *YOU* just defined one 2 sentences earlier. If you are "long" your home, and you buy homeowners insurance, you are placing a hedge."Not in any traditional sense of the financial market.How does that property insurance policy protect anyone from a decline in the value of the house.There is are no equivalents to puts and calls for homes. <<<A "hedged long" position is effectively just a smaller position.>>>"Not in direct proportion, no. You can go long $100,000, and hedge against loss up to 100% without selloing 100% for significantly less than $100,000."Nothin you wrote in this response contradicts Ray's prior statement."A naked long is strictly a bet on price without time considerations. A hedge is often a bet including time considerations."If it often includes a time consideration, then sometimes it does not, so that is not a defining characteristic."If you buy a $100,000 home, and "lose" $250 a year by hedging with hazard insurance, you are doing so because if a fire (drawdown) wipes out your equity you don't want to live in a tent in the park while you wait out the time to manually rebuild your home without external financial support. Yes, you are still "losing" your $250 a year, every year that the insurance hedge is not needed... but the year it is needed the payoff from the hedge *INCREASES* your net position, not decreases."And if you have to move across country and sell your house after the real market has turned down, how does the insurance policy hedge such risk? I see none, unless of course you are willing to suggest arson (which I doubt).Regards, JAFO
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