# The Most Active ETFs And Their Hedging Costs

**By David Pinsen:**

**A drop in volatility on an up day**

The Chicago Board Options Exchange Market Volatility Index (VIX) dropped 14.54% Tuesday, closing at 36.27, as stocks rose and the Dow had its best day in two weeks. The table below shows the costs, as of Tuesday's close, of hedging 8 of the 10 most actively traded ETFs against greater-than-20% declines over the next several months, using optimal. First, a reminder about what optimal puts mean in this context, then a step by step example of finding optimal puts for the most actively traded of the ETFs below.

**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 Portfolio Armor (available on the web and as anComplete Story »

- Original article
- Login or register to post comments

## Related

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

By David Pinsen:As stocks rallied on Thursday on news that central banks would provide European banks with unlimited dollar loans, the Chicago Board Options Exchange Market Volatility Index0 (VIX) dropped 7.6% to 31.97. That volatility index has still closed over 30 every day since August 5th. The table below shows the costs, as of Thursday's close, of hedging 8 of the 10 most actively traded ETFs against greater-than-20% declines over the next several months, 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.

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

David Pinsen submits:The table below shows the costs, as of intraday Wednesday, of hedging 16 of the 20 most actively-traded American Stock Exchange names against greater-than-20% declines over the next several months, using the optimal puts for that. First, a reminder about why I've used 20% as a decline threshold, and what optimal puts mean in this context, plus a quick note about why there were no optimal puts for 4 of these ETFs. Optimal Puts

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

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

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

By David Pinsen:In a Seeking Alpha article on Wednesday ("12 High Dividend Stocks with Low P/E Ratios"), Insider Monkey posted a list of 12 large-cap companies with low P/E ratios. I thought it would be interesting to look at the hedging costs of those stocks.

By David Pinsen:The major indexes rose on Monday but volatility remained relatively high. After a 9.3% drop in the Chicago Board Options Exchange Market Volatility Index (VIX), it closed at 32.28 on the day, nearly double its levels of late July. The table below shows the costs as of Monday's close of hedging some of the most widely traded ADRs against greater-than-20% declines over the next several months, using optimal puts.