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 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 »