Protecting portfolio with put options as a hedge


With politicians bickering, that is mostly due to aggressive action from central banks. Worse, doing nothing is all they have to do to mess things up. After posting gains in a portfolio, the last thing you want to do is give them back. Protecting your stock portfolio protfcting an extremely important part of portfolio management. It is necessary rpotecting understand how each works and how well each achieves the goals of protecting portfolio gains.Types of Protection and Making the Right ChoiceThe consideration to buy protection is typically due to a fear that something negative will happen in the short term which will impact your portfolio.

Doing so will lock in the value of the portfolio to guard against any adverse market movements. This strategy is also known as a protective index collar.The idea behind the index collar is to finance ws purchase of the protective index puts using the premium collected from selling the index calls. ImplementationTo hedge a portfolio with index options, we need to portfoio select an index with a high correlation to the portfolio we wish to protect.




Protecting a as portfolio put with hedge options

Protecting portfolio with put options as a hedge