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To: Glenn D. Rudolph who wrote (50879)	4/16/1999 3:23:00 PM
From: HG	Read Replies (1) \| Respond to of 164684

LOL - Not only rich, famous and handsome - but "cute" as well ! :-)

To: Glenn D. Rudolph who wrote (50879)	4/16/1999 9:35:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The classic way to hedge a diversified stock portfolio using options is to buy puts on the S&P 500 Index. A put gives you the right to sell a contract (100 shares) at a given "strike price" up to a certain expiration date -- usually a couple of months away. When the index goes down, the option to sell at the preset price increases in value, offsetting the loss in your portfolio. For example, to protect a $130,000 diversified stock portfolio through June, you could buy a put on the S&P 500 Index for $4,400. Once the market goes down 3.4% (the cost of the option as a percentage of your portfolio), you will make $1 on the option for every point the index falls. If the market goes up, the option expires worthless. "You have to realize that to do this on an ongoing basis would be expensive," says Michael Schwartz, chief options strategist at CIBC Oppenheimer. You can reduce the cost by buying puts that are a little "out of the money," which means the strike price is below the index value, so the first part of the decline isn't hedged. You also pay less for options that last a shorter time. Or you could just hedge part of your portfolio. "I think that to protect a portion of one's portfolio is probably prudent," says Schwartz. "Why risk everything?" Since you can't buy just part of a contract and each S&P 500 option hedges $130,000 worth of stock, options on the S&P 100 index make sense for many individuals, says Fullman. The cost of S&P 100 Index options is about half the S&P 500 options and could be used to hedge a $67,000 portfolio of large-cap stocks. TOO HIGH A PRICE. Options can also be used to hedge a particular stock, or a sector. Many investors have inquired about how to protect Internet holdings, strategists say. But Schwartz thinks that this is generally too expensive. For example, if you bought a put on The Street.com Internet Index, which includes stocks such as Amazon.com, America Online, Yahoo!, and Excite, it would cost $8,800 to hedge $65,000 worth of Internet stocks. For most investors, that price is too high, Schwartz says.