Tracking the CBOE put protection index (PPUT) against the SPX provides useful information on the cost and timing of hedging. The PPUT index tracks a 5% out of the money one-month put strategy rolled monthly. There is a clear drag with performance versus the index which should be expected given the strong equity returns until the March 2020 crisis. At that time, the value of the put protected equity exposure downside. The five year total return through mid-April 2021 was superior to an unhedged portfolio.
Nonetheless, the five year performance does not tell the full story if an investor decided to employ a put hedge strategy starting on April 1, 2020. In that case, there is a strong performance drag.
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