Women in Trading: How to Create an Inexpensive Hedge to a Stock Portfolio Using Options on Futures*
Purchasing put options as portfolio insurance can be expensive and is often ineffective; in a longstanding bull market well-intentioned attempts to protect a stock portfolio can easily do more harm than good. There is a better way to hedge the price risk of stocks by utilizing preferable margin treatment in an options on futures account. Specifically, traders can execute a risk reversal strategy in which put options on the E-mini S&P 500 are purchased and call options in the same expiration month are sold to finance the cost of the insurance policy. The result is cheap, or even free, portfolio insurance! Join us to discuss the advantages and disadvantages of this strategy.