Apr 30, 2013
The Advisors Option 5: Asset
Tricks of the Trade: The myth/lie of asset
- It used to
be 20 different underlyings to be fully diversified. Now with
increasing correlation, it is closer to 40.
asset allocation as a method of defense. The old style of asset
allocation in no longer effective.
nothing about options, hedging or volatility was discussed at the
Morningstar Advisor Event last year.
- You are not
fully diversified in this market unless you have something that
gives you volatility exposure and negative correlation, i.e.
protective puts, collars, volatility instruments, etc.
- "Hedging is
too expensive!" The cost of the protection is mitigated,
particularly if you manage the positions effectively.
Outperforming to the downside is still outperforming.
Defensive positions can still generate competitive
The purpose of this conversation is not
just to promote Swan, but also to show that incorporating options
into you asset allocation is part of the fiduciary responsibility
of any advisor in this marketplace.
Listener Mail: Tell us what
you want to know:
from (Name withheld) - As an active financial manager coming to
options for the first time, I'd like to know what the hosts
consider to be the most effective options position for busy
advisors? If I only have time to learn one, I'd like it to be the
from Tom Meadows, Pittsburgh, PA - What percentage of financial
advisors and planners do you estimate currently use options?
from Allan Gregory, San Diego, CA - If options education for
financial advisors is such a problem, why doesn't OIC or some other
entity offer a certification course for planners and advisors?