Hi
Have been following this thread for sometime and liked the tussle in viewpoints
Just a query/viewpoint.
Assume that nifty falls to a great extent by 28 Dec 2017 when your options expire and so does your portfolio but if you are so steady to hold onto your stocks for a 5-8 year period why not use this opportunity to add onto these positions rather than put money on the table for paying premiums today which are ~2% of the portfolio value?
Trying to create a protective put hedging strategy for a long term investment horizon is not worthwhile in my humble opinion. That too for small time retail investors it could seriously go wrong. For such a strategy almost on a daily basis one needs to calculate beta of the portfolio, delta of the puts and readjust basis the portfolio and contract value. Its not only a costly affair but a time consuming activity. Yes one can simply buy puts and think that his or her portfolio is hedged but the Greeks will create havoc as time passes.
Such hedging requires to be âoptimallyâ hedged as there are too many variables at play mathematically speaking and it is for those who have the number pressure to show to their investors quarter on quarter. When the same person is the investor, analyst and the trader all rolled into one I donât think one should be bothered.
Personally I would not mind to have a drawdown and use that phase to bet heavy/add on to my favorite horses.
Regards
Deepak