TITLE

The Varying Cost of Options and Implications for Choosing the Right Strategy

AUTHOR(S)
Dubil, Robert
PUB. DATE
May 2010
SOURCE
Journal of Financial Planning;May2010, Vol. 23 Issue 5, p62
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article discusses the implication of using index options in protecting equity portfolios. It examines the effect of combining the VIX index, which identifies at-the-money (ATM) implied volatility, and volatility skew and bid-ask spreads on various cost of options. It determines that buying index is capable of reducing risk from up to 50 percent and must be subsidized by selling options. It also explains the effect of puts, put spreads, collars, zero-cost collars, and short out-of-the-money (OTM) calls on the cost of options.
ACCESSION #
50403333

 

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