Explore Your Options by Jay Kaeppel
PORTFOLIO HEDGING WITH OPTIONS
I am concerned about the stock market. It has been showing weakness and Iím fearful a bear market may begin soon. At the same time I am hesitant to sell stocks from my portfolio. Is there a way I can hedge the value of my stock portfolio using options?
Hedging an existing position or portfolio is one of the three primary uses for options (in addition to speculating on price direction and generating income). While hedging an individual stock is fairly straightforward, hedging a stock portfolio requires an investor to ask and answer a few key questions ...