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Look at e-mini's and selling bear call spreads to help protect your
portfolio without exposing yourself too much.
THE DOCTOR wrote:
>
> One of the "easiest" guages of P.I. would be to examine call open interest
> and compare it to put O.I. in the Index options. Look at
> OEX...SPX....DJX. Where it fits examine both the future's options and cash
> products. Only part of the P.I. is done in the listed market, but it
> should act as a good benchmark.
>
> One thing though, in 1987 it was really much more than a "stop order" the
> process of dynamic hedging..shorting SPU futures in an attempt to replicate
> put options..actually IMHO contributed and helped create the crash.
> Dynamic hedging essentially forced the hedgers to sell futures into the
> selloff. They fueled the rally on the upside and fueled it on the
> downside. When you dynamically hedge you attempt to replicate the delta of
> a put by shorting futures. If you need a given short delta you short
> futures in the correct ratio to replicate the puts. When the market goes
> down..real puts would grow in sensitivity...so you short more futures. In
> essence you sell low and buy high...so you fuel rallies and selloffs alike.
>
> The dynamic hedge business which was something like 50 - 100 Billion
> dolars(depending on which estimate you believed) is much much smaller
> today.
>
> Tin Mervin Yeung wrote:
>
> > Hi, RT,
> >
> > I think this is everyone's mind: buying stocks is a great idea, but is
> > the crash (in 1987 fashion) likely to re-occur? We know that portfolio
> > insurance was nothing more than a massive stop-loss order--it was
> > insurance in name only. Portfolio insurance magnified the crash in
> > 1987.
> >
> > For those of you really understand the equity market, is portfolio
> > insurance still a significant force in stock market today? Where to
> > find such information?
> >
> > Mervin
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