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Understanding LEAPS: Using the Most Effective Options Strategies for Maximum Advantage by Allaire

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CHAPTER 16Buying Index LEAPS Puts for Fun and Profit

BUY THE MARKET AND INSURANCE—THE MARRIED PUT FOR A HEDGER

Different stock mutual funds have different objectives. Some attempt to mimic and outperform the S&P 500 or the NASDAQ 100. Others configure their own basket of stocks, including Aggressive Growth, Small Cap Value, Mid Cap Growth, OTC Stocks, Sectors, etc. One problem they face is that they usually stay pretty much fully invested. If the market corrects 15 percent, many funds would see their value decline by a similar percentage. If the market goes up 5 percent but a fund is 50 percent in cash, it will most notably lag its peers. A strategy using index LEAPS puts for portfolio protection is worth a look, not only for institutional investors ...

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