Hedging the Dow

Tue, 08/02/2011 - 11:32 EDT - Seeking Alpha

By David Pinsen:Weak ISM numbers and progress toward a debt ceiling dealThe Dow closed down 0.09% Monday, as concerns about weak ISM Manufacturing Index numbers weighed on the market, despite progress toward a debt ceiling deal. The Chicago Board Options Exchange Market Volatility Index (VIX) declined 6.3%, to 23.66, on the day.
Hedging the Dow
The table below shows the costs, as of Monday's close, of hedging each Dow component, and the Dow-tracking ETF (DIA), against greater-than-20% declines over the next several months, using optimal puts. First, a reminder about what optimal puts mean in this context, why I've used 20% as a decline threshold.
Optimal Puts
Optimal puts are the ones that will give you the level of protection you want at the lowest possible cost. As University of Maine finance professor Dr. Robert Strong, CFA has noted, picking the most economical puts can be a complicated task. With PortfolioComplete Story »

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Hedging the Dow Using Optimal Puts
David Pinsen submits:On a day when the major indexes rose, the Chicago Board Options Exchange Market Volatility Index (VIX) dropped 2.56% Monday, closing at 20.54. The table below shows the costs, as of Monday's close, of hedging each Dow component, and the Dow-tracking ETF (DIA), against greater-than-20% declines over the next several months, using the optimal puts to do so.
Hedging the NYSE's Most Active Names
By David Pinsen:As of Wednesday's close, the Chicago Board Options Exchange Market Volatility Index (VIX) had ticked down 0.62% on the day to 19.09. The table below shows the costs, as of Wednesday's close, of hedging the most actively-traded New York Stock Exchange stocks against greater-than-20% declines over the next several months, using optimal puts. Comparisons
Hedging the Dow
David Pinsen submits:The table below shows the costs, as of Wednesday's close, of hedging each Dow component, and the Dow-tracking ETF (DIA), against greater-than-20% declines over the next several months, using the optimal puts for that. First, a reminder about what optimal puts mean in this context, why I've used 20% as a decline threshold. Optimal Puts
Hedging The Dow This Labor Day Weekend
By David Pinsen: A Down Day for the Dow The Dow closed at 11,240.26, down 2.2% on Friday, September 2nd, and the Chicago Board Options Exchange Market Volatility Index (VIX) rose 6.6%, to 33.92 on the day. The VIX has closed above 30 every day since the market meltdown of August 4th. Hedging the Dow
Hedging the Most Active NYSE Names
David Pinsen submits:As of Monday afternoon, the Chicago Board Options Exchange Market Volatility Index (VIX) had ticked down 7.32% on the day to 20.25. The table below shows the costs, as of Monday afternoon, of hedging the most actively-traded (by share volume) New York Stock Exchange stocks against greater-than-20% declines over the next several months, using the optimal puts for that. Comparisons
The Most Active ETFs And Their Hedging Costs
By David Pinsen: A drop in volatility on an up day
The Most Active ETFs: A Look at Their Hedging Costs
David Pinsen submits:The Chicago Board Options Exchange Market Volatility Index (VIX) dropped 0.94% Friday, to close at 23.16. The table below shows the costs, as of Friday's close, of hedging 18 of the 20 most actively traded ETFs against greater-than-20% declines over the next several months, using the optimal puts for that. First, a reminder about what optimal puts mean in this context, and why I've used 20% as a decline threshold. Optimal Puts
Hedging the Dow Components
By David Pinsen:The Dow closed at 11,269.02, up 1.13% on Friday, August 12th, and the Chicago Board Options Exchange Market Volatility Index (VIX) declined 6.77%, to 36.36 on the day. To illustrate how this level of volatilty affects hedging costs, I've included two tables below. Hedging the Dow with the VIX at 36.36 and at 23.66
Hedging the 20 Most Active Nasdaq Names
David Pinsen submits:After rising 6.13% on Friday, the Chicago Board Options Exchange Market Volatility Index (VIX) ticked up another 3.98% Monday. The table below shows the costs, as of Moday's close, of hedging 17 of the 20 most actively-traded Nasdaq names against greater-than-20% declines over the next several months, using the optimal puts for that. Comparisons
Hedging the NYSE's Most Active Stocks
David Pinsen submits:At the end of the sixth straight down week for stocks, the Chicago Board Options Exchange Market Volatility Index (VIX) ticked up 6.13%. The table below shows the costs, as of Friday's close, of hedging the most actively-traded (by share volume) New York Stock Exchange stocks against greater-than-20% declines over the next several months, using the optimal puts for that. Comparisons

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