Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: Hedging


Thanks John!


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

John -

In general, when hedging a portfolio, is it better to use short dated options and continue to roll out or long dated options.

Await your answer and thanks for all your help,

Minyan Jeff

Jeff -

There is no general application here: the primary consideration is prices.

When options prices are expensive, you want to go as short as possible and then roll out expecting volatility to come in (longer term options are more sensitive to rises in volatility). If options are cheap, go out longer; that way, if volatility rises you are already locked in.

Right now options prices on individual equities are very cheap. If you are thinking about buying a put for a specific event, go a little longer out to make sure your timing is right. If you have to roll, chances are relative put prices will be more expensive when you roll.



No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos