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Politics : High Tolerance Plasticity
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To: Tommaso who wrote (1408)3/12/2001 2:57:22 PM
From: Ian@SI  Read Replies (1) of 23153
 
It isn't obvious to me why one would choose to buy a deep in the money DOW LEAP put
for protection against a fall.

1. It costs much more than an 'at the money' or slightly out of the money PUT; yet doesn't
give any better protection unless the drop is rather modest. In which case, why bother
risking all that time premium.

2. The DOW has been the most stable of the major indices. Thus buying a DOW PUT
provides the least protection should this bear continue for an extended period.

Both time and the long term trend are working against the PUT holder.

Puzzled,
Ian.
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