The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, “Is using a protective put as a hedge for ETFs worth the cost?” Now, there's a lot to unpack here, so we’re going to try to do it in a couple of minutes. But the key points that we have to realize about using a protective put to hedge an existing ETF position is that using any sort of long option strategy requires an outlay of cash from our account. And so, the rub that I always have and the data confirms this across the board as well, is that when you outlay cash as means of buying insurance, that insurance is a net cost on the portfolio. This means that sometimes the insurance might kick in and it might help. Consistently buying a protective put as a hedge for an ETF position or a stock position that you have might work in some cases, meaning the market might go down at just the right time that you bought the protective put. But keeping and maintaining that constant insuranc