Four index puts sound right for $200,000 of stock, but you need five. This lesson shows how to measure how much your stocks swing, how many puts to buy, which strike to choose, what a year costs, and why the hedge can still miss.
After this lesson you can
- Measure how much a portfolio swings against the index, with beta
- Work out how many index puts a portfolio needs
- Compare strikes and what a year of protection costs
- Explain why an index hedge never fits a real portfolio exactly
- Make a hedge cheaper and adjust it as things change, and avoid the five mistakes
Chapters
- 0:00Four puts or five
- 1:09Beta, how much your stocks swing
- 2:17How many contracts
- 3:32The floor and the deductible
- 5:24Choosing the strike
- 6:33What a year costs
- 7:41Cheaper ways to hedge
- 9:34Why it never fits exactly
- 10:58Adjusting the hedge
- 12:27Five mistakes
- 13:17The whole lesson on one screen