How to Hedge Our Buy List

David Pinsen has an interesting post at Seeking Alpha on how investors can hedge our Buy List. According to David our “portfolio has a negative hedging cost, meaning you would effectively be getting paid to hedge.”

I want to be clear that the expected return figures are his not mine. Nevertheless, David writes:

(F)or an investor who is only willing to risk a 10% decline, features a lower potential return, as you might expect: 6.87% over six months. That potential return is what the portfolio will return if each of its underlying securities achieves its expected return. But in the worst-case scenario — if every one of these securities went to zero before their hedges expired — the investor’s downside would be strictly limited to a decline of 9.81%.

Posted by on February 25th, 2014 at 10:49 am

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