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1. You don't know if the Beta for his portfolio is the same as the index he is
going to short and
2. His portfolio can go in the sewer and the index rally.
The only way to short any index in this situation is to use a call for
protection and limit your risk. Ira.
Earl Adamy wrote:
> Since you will continue to hold the original portfolio, you appear to be
> assuming that any decline in price will eventually be fully recovered. Given
> this assumption, hedging by shorting futures contracts should offer superior
> returns to buying puts. In buying puts you will be paying for the insurance.
> In selling futures you would be collecting the net decrease in premium which
> is roughly equivalent to a shade over the yield on tbills. This type of
> hedging can be performed for several different equity indexes, bonds,
> Nikkei, etc.
>
> Earl
>
> ----- Original Message -----
> From: <DPritch901@xxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Sent: Friday, May 21, 1999 10:45 PM
> Subject: Re: OPTN - DOW Crash Insurance
>
> > WHAT OTHER LEAP OPTION IS AVAILABLE AND TRADLABE AT A FAIR PRICE IE
> > PUTS DON
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