03-22-2022, 12:35 PM
Buying put options instead of holding bonds for long term investor
<!-- SC_OFF --><div class="md"><p>So, I've been following the old school way of holding bonds as a hedge against downwards trends in equities, which, as you can imagine, hasn't been so hot lately. I'm about 70% equities (SPLV), 30% long term bonds (TLT). So a fairly conservative portfolio. The equities part of my portfolio isn't so bad right now, but bonds are getting trashed. </p> <p>With that trashing in mind, I'm thinking I could buy long term puts (1 year) on the underlying equities I hold, instead. Every six months, I would be selling them, and buy new 1 year puts, which seem to be the timing that has the lowest carrying costs. </p> <p>It seems to me it would be cheaper to do that in a rising market than traditional bond holding, which reduce the amount invested in equities by the value held in bonds, and hence, the return. I could also invest in more aggressive ETFs than SPLV, since the downwards trend would be protected.</p> <p>Being the inverse of the long equities position, it means it would also do well during a major correction. </p> <p>The only issue would be during a flat market, but then, I see that as the cost of getting "insurance". </p> <p>Anything stupid I'm overlooking before I run some numbers on this to see if it has any merit?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/wakeforce"> /u/wakeforce </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tjec0z/buying_put_options_instead_of_holding_bonds_for/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tjec0z/buying_put_options_instead_of_holding_bonds_for/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>So, I've been following the old school way of holding bonds as a hedge against downwards trends in equities, which, as you can imagine, hasn't been so hot lately. I'm about 70% equities (SPLV), 30% long term bonds (TLT). So a fairly conservative portfolio. The equities part of my portfolio isn't so bad right now, but bonds are getting trashed. </p> <p>With that trashing in mind, I'm thinking I could buy long term puts (1 year) on the underlying equities I hold, instead. Every six months, I would be selling them, and buy new 1 year puts, which seem to be the timing that has the lowest carrying costs. </p> <p>It seems to me it would be cheaper to do that in a rising market than traditional bond holding, which reduce the amount invested in equities by the value held in bonds, and hence, the return. I could also invest in more aggressive ETFs than SPLV, since the downwards trend would be protected.</p> <p>Being the inverse of the long equities position, it means it would also do well during a major correction. </p> <p>The only issue would be during a flat market, but then, I see that as the cost of getting "insurance". </p> <p>Anything stupid I'm overlooking before I run some numbers on this to see if it has any merit?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/wakeforce"> /u/wakeforce </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tjec0z/buying_put_options_instead_of_holding_bonds_for/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tjec0z/buying_put_options_instead_of_holding_bonds_for/">[comments]</a></span>Kind Regards R