Key insights
- The post discusses strategies for downside portfolio protection, specifically long-dated put options (LEAPS) on SPY. The author expresses concern about timing market corrections and seeks cost-effective protection. However, the author's own research indicates that long-dated puts may not provide sufficient protection relative to their cost, suggesting a bearish sentiment towards the efficacy of this hedging strategy.
I’m interested in finding out what is the best / easiest / cheapest way to get some downside protection for my portfolio.
I’m only a little familiar with options. I know I could buy LEAPs on SPY or similar index ETF, but is this my best choice?
I don’t want to move to cash and risk the market continuing to rise - the problem there is you have to get the timing right twice. Exit somewhere near a top and then get back in somewhere near a bottom. Very hard to do. There are people who got out in 2008 and are still waiting to re-enter.
I figure we are seriously overdue for a decent correction, however, I don’t know when, from what level, for how long and how deep that correction may go. I figure my best choice is to just find the longest dated protection I can find.
Any other advice or suggestions? Are long dated puts the best choice?
Thanks!
Edit: Yeah, I’m underwhelmed at what buying long dated put options would provide as protection. I had this as a reply with a YouTube video linked that showed how much (or little) long dated put options helped protect on the downside. Needless to say- it didn’t help as much as you might think and comes at a not insignificant cost.