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Protecting an STW portfolio with puts

Discussion in 'Exchange Traded Funds (ETF)' started by The Stig, 8th Feb, 2008.

  1. The Stig

    The Stig Well-Known Member

    Joined:
    3rd Dec, 2007
    Posts:
    190
    Location:
    Central Coast NSW
    Hi,

    I am about to start dollar cost averaging into STW.

    I also want to protect the investment with puts from the XJO.

    Does anyone know how many STW shares an XJO put option would protect????

    I am having difficulty figuring this out and would like some help.

    Cheers
    The Stig
     
  2. Glebe

    Glebe Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    932
    Location:
    Sydney, NSW
    I have no idea about puts, derivatives is an area I know little about.

    When you find your answers though, if you could do a small little summary thingy that'd be appreciated!!
     
  3. The Stig

    The Stig Well-Known Member

    Joined:
    3rd Dec, 2007
    Posts:
    190
    Location:
    Central Coast NSW
    I am hoping ASX Broker may know the answer :D
     
  4. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Stig,

    You can find option contract specifications for STW here (Options over the StreetTracks S&P/ASX200)

    It looks like (I don't trade options myself and don't encourage others to either) for the indices, it's one for one thousand (1:1000) which is the same for shares.

    Theoretically, it should protect you 100% but there are a few variables which may come into account so they'll probably protect you 95% to 99.9999%. An example would be the 199th stock moving in and out of the index asx200 quicker than it does with STW200. In a non-weighted scenario the difference would be 0.5%, in a weighted scenario (eg, asx200) it's probably closer to 0.1%.

    Good luck with it and read up as much as you can.

    Cheers,

    Dan

    PS Before trading in derivatives make sure you understand what you are doing. If you don't understand what your doing, don't do it. If you do understand what your doing speak to a derivative specialist before making a derivative position decision.