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Protective Puts: Part 3

Market Measures

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We’ve seen previously that buying protective puts, regardless of the delta, is not an effective portfolio hedge. In this study, the research team takes this concept one step further to see if varying management targets can improve performance.

Although long puts generate a positive return during severe market corrections, there doesn’t appear to be a consistent effective management strategy for buying puts. Whether we let profits run, consistently take small winners, or manage by time, the long put doesn’t provide an adequate portfolio hedge.

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