Jan 14, 2010 10:41 am
Does anyone buy Married puts with clients? Like BAC and a Jan 2012 20 put ?
How has it done for you?
Some expensive insurance for a stock that’ll be 40 by then. Should offset with a naked one
Typically it is a very expensive hedge all things considered. It's not nearly as expensive as it was in the recent high VIX environment. Even with a low VIX the stock may have significant implied volatility raising the price. The hedge ratio will also have a large influence on cost. There are much cheaper ways to hedge a stock against loss than a married put BUT it depends on the agenda employed and the length of time the hedge is needed. Before you married it you may consider using a stop for free. If it's needed for an event like earning or guidance shorting against the box works well. I use all the above often.