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The sorts of numbers you ran for Sears is exactly why I backed away from using options to hedge bonds. The gains are too tiny to bother with. 6%? I've got bond positions on right now in which I'm up over 100%. Big whoop if I lose a couple. My net still beats the grief and small returns of a hedged bond strategy.

Also, I'm not worried about a market crash. The bigger and nastier, the better, because it will clarify things. (But I would like it to hold off for another two weeks while I'm a fishing trip. LOL)

Yeah, I'm long some of Sears debt, just as I'm long some of just about every issuer in the market. That's what a bond investor does. He buys bonds. In fact, he buys a basket of them, and that basket, through its composition, is his "hedge". OTOH, if a person were to buy selected distressed issuers and then hedge them, then he/she could eke out the protected gains you're describing. But that's a different game. A viable game, but a different game, and not the one I'm playing.

If you see a clear path, go for it. (I've got other fish to fry, quite literally).

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