As we approach an era of economic uncertainty, many investors are becoming concerned about the value of their investments falling. This is where, if used carefully, options contracts can give investors the ability to safeguard their investment portfolios. In this week’s episode, Grant explains the pros and cons using options as portfolio insurance, as well as some major risks investors could face when using this investment strategy. 

 

Show Notes

[02:19] Introduction –  Grant discusses how investing in options can be used to reduce portfolio risk for some investors.

[06:57] Put Option – Grant gives a comprehensive overview of put options and the benefits and risks of investing in them.

[17:10] ETF – Grant explains how having option contracts on ETFs can be advantageous.

[20:25] SPY – Grant describes SPY ETFs and provides a hypothetical scenario on utilizing option contracts.

[24:30] Call Option – Grant shares the pros and cons of call options.

[31:20] Combining Strategies – Grant describes an investment option in which you can create revenue by selling call options against positions that you already hold in your portfolio.

[34:22] Be Mindful – Grant stresses the importance of limiting risk, and why you should proceed with caution if you’re considering this investment strategy.

 

Resources

Mentioned in the episode:

Portfolio Insurance using Index Puts: theoptionsguide.com/portfolio-insurance-using-index-puts.aspx

Stocks, Bonds, Options, Futures, and Portfolio Insurance: A Rose by Any Other Name: bostonfed.org/-/media/Documents/neer/neer495c.pdf

Using Put Options To Protect A Portfolio Of Tech Stocks: investors.com/research/options/put-options-protect-portfolio-of-tech-stocks/