Hedging with Put Options: A Costly Endeavor

After a decade-long economic expansion and bull market in US stocks, investors are understandably nervous about downside risk. Global economic policy uncertainty rose sharply in 2018, fueled by the threat of a trade war among the world’s largest economies. With the stock market crash of 2008-’09 a distant but still painful memory, many investors are asking about efficient ways to protect their hard-won gains of the last decade. One of the primary tools that investors consider is the purchase of put options to protect their equity portfolios.