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Strategies & Market Trends : Portfolio Protection + Money Management for the Long Term
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To: Tom Trader who wrote (20)4/9/2000 7:20:00 PM
From: BDR  Read Replies (2) of 57
 
Good points all. No, one need not have puts or other forms of protection in place at all times. Using the example of QQQ puts that I gave would cost about 1% of the value of the portfolio per month. But, if you don't always have something in place, we get back to the timing issue. Recently I happened to start looking for protection just as my portfolio hit its high (early March) but I can't claim to always be that prescient.

Puts on specific stocks could be used. Would they be more or less expensive than puts on an index? I would think more. Feasibility of doing so would depend on the size of your holdings and the commission schedule you are dealing with. Using the betas of the individual holdings would allow one to adjust the portfolio's capitalization that would need to be protected and still buy only an index put. I am still trying to figure out how to get that information about stocks' beta or volatility to make the calculation.

I am glad you brought up the subject of covered calls. I had not discussed that possibility because I was trying to keep thing simple, but that would be a logical way to offset the cost of puts.

By the way, Larry McMillan has a website: optionstrategist.com
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