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At 5:14 PM -0400 7/6/98, Bill Masi wrote:
>I'm definitely feeling like I need some insurance. Fire and flood, auto
>and health are all covered and with today's AMZN close at 140, it seems
>time for a nice policy of portfolio insurance.
>
>Especially since I oversee a couple of portfolios that have a cost basis as
>far back as the 1940's and which can't be liquidated.
>
>I'd like to buy a handful of LEAP puts that would work more-or-less in
>tandem with the portfolios. (An x% loss in the equities to be offset by a
>like gain in the options.)
>
>You'd think a broker would have this kind of calculation at hand, but none
>of the ones I deal with, wirehouses to Schwab, can come up with a number
>that makes sense.
>
>Can anyone on the list offer a formula - or a reference to more info - that
>shows how many SPX options, at what strike might cover each $ 100,000 of
>equity value?
Hussman Econometrics (http://www.concentric.net/~hussman/) is now
recommending one Sep 98 OEX 550 Put for each $26,000 of portfolio value.
According to my tube, they closed today at 11.75. So 4 would cost you about
$4,800 or 5% of the portfolio value - a bit steeper than fire insurance!
He tends to roll them about every month or two at some incremental cost.
An article in today's Barrons (page MW17) discusses how overpriced OEX puts
are now.
You can probably scale this to SPX puts if you prefer these.
I have a spreadsheet somewhere that calculates the price vs. OEX value vs.
time if you get desperate.
Bob Fulks
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