If you need to unwind some positions then the strategy you lay out would be prudent. I’m fairly confident that XHB will recover toward the latter part of the year. The government is, in theory, supporting the GSE’s and Congress will likely pass some sort of housing bill. This along with November elections will set a different mood and give the markets some confidence.

The ONLY thing I can think of that would derail the whole market is war with Iran or some disaster that sends oil rocketing to $200/barrel. If that happens, all bets are off and every man for himself.

I have large losses that are tied to one ETF: DDM (Double Dow leveraged) and I’m comfortable holding the Dow 30 long term; other than that, most of my positions have been very profitable.

For example, in your example above, if you could sell XHB calls for $1 premium - but, only at $19 - would that be something to consider? I realize that everyone’s thinking will be slightly different on this - and the real advantage is in off-setting short-term cap gains, but it seems like it might make sense for some folks, no?

In terms of XHB, I bought 400 at $22.72 then 400 more at $19.80 for an average of 800 shares at $21.26. Because XHB is at $17.01, I have a paper “loss” of $3,400.

So if I panicked and sold all my shares on Monday for $17.01, I would have lost $3400 (minus profits from calls). I have no intention of selling, the preferred way of selling my positions is to be called after selling short during expiry.

So with XHB, I could sell January $23 strikes for about $0.50 and earn $400 (or 2% in 6 months). It’s not the greatest return so I’ll wait for XHB to climb back to around $20 then sell January $23 strikes for about $1 or $1.50, otherwise I’ll ride it out.

I started posting during expiry my positions because people were asking me about updating my portfolio positions periodically. Let’s face it, the market is down but as long as you don’t sell and the market recovers, those positions will revert (eventually) to where you bought them.

I also have a cash position of about 50k right now.