Hedge when you don't need it....

...is one of Macro Man's favourite maxims. The constructive risk asset view has paid dividends, despite some rather gut-wrenching price action last week. Now that the portfolio seems safely out of the water and into the black, hedging against adverse developments in what should be an eventful week would appear wise.

Macro Man therefore does 450 lots of a November 1560/1515 SPX risk reversal, trading away a bit of upside for the ability to insulate the portfolio from a Fed-, payroll-, or credit-induced meltdown over the next few weeks. The strategy is done at zero cost and should dampen portfolio volatility over what is sure to be a noisy period.
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October 31, 2007 at 3:05 PM ×

Just to clarify: buying a 1560/1515 SPX risk reversal means selling calls @1560 to buy puts at @1515?