Futures For You by Carley Garner
TIMING YOUR HEDGE (PART 2 OF 2)
Is there an efficient way to hedge stock portfolio risk in the futures and option markets?
Last month I discussed the use of options on futures, and futures contracts, when hedging a stock portfolio. Now I’ll focus on a creative alternative using a combination of long and short options. I’ll also discuss the importance of timing hedges properly. After all, a hedge only benefits the investor if the proceeds are realized.
Although there are merely two hedging vehicles—options and futures—there are a nearly unlimited number of strategies with varying levels of aggression...