If you are looking to protect your portfolio, consider put options.

The positives about puts are that they are negatively correlated -- meaning they go up when the value of the portfolio goes down, and easy to understand, but the negatives are that puts are expensive.

There are many choices when considering which puts to buy to protect your portfolio. How many days to expiration should the puts be? How far out of the money? When should you exit a put?

Using our optimizing backtest process, we tested many combinations of long put strategies as shown in the table below:

null



For example, we tested the 90, 180, 365, and 500 Days to Expiration and 0.20, 0.10, 0.075, 0.05 Delta and exiting when the profit from the put is > 250%, 300% and 350% in all combinations.

The strategy that had the returns and best year profit objectives that meet our investment objectives the best (your objectives will vary).was the 500 day, 20 delta put.

Testing more to verify our results, we staggered the put buying and added a spread yield constraint. We got the following results:

null

null

If you are interested in learning more about this strategy, respond to request a link then sign up for a free 14-day trial and then $99 per month: Free Trial

related posts

Using Call Put Ratio Charts For Indexes And Components
Jul
16
covered call, puts

Using Call Put Ratio Charts For Indexes And Components

The call put ratio can often reflect the bullish or bearish views of options traders, with more...

Read Post
Backtest Basics: Trading Around Earnings
Jun
18
Earnings, Backtesting

Backtest Basics: Trading Around Earnings

In our backtester, you can test a strategy that trades around earnings as well as strategies...

Read Post

We're here, if you need us.

Still curious how we can help you?




LET'S CHAT