- April 23, 2011
- Posted by: Parker Evans
- Category: Financial Planning and Investment Blog, Principal Protected, Research, Stocks
The VIX Index is a measure of market expectations for near-term stock price volatility derived from current market quotes on S&P 500 index options. The VIX is also known as the “Fear Index”. Watching the VIX allows professional portfolio managers to monitor the cost of principal-protecting a stock portfolio.
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As you can see in the chart above, the VIX index (“fear!”) has receded to a post-recession low. This means portfolio insurance is currently relatively cheap. A recent article in Barron’s describes some practical ideas on how to capitalize on this fact:
If you are worried about the near future, buy puts to protect your stocks. (or) …think of selling some stock and replacing your shares with calls. You can use stock-replacement strategies to withdraw your initial investment and limit your risk. –Steven M. Sears
Successful Portfolios is adept at helping clients execute principal-protected investment strategies that avoid the high-costs and illiquidity of annuities and structured products.