AuGod!

4 Reasons Investors Shouldn't Rely on Fixed Income ETFs

Thanks and Regards to mbkelly.

"Do you think that ETFs should always be protected with Puts?

In words of one syllable or less - NO! Options can be a handy tool and are useful for several things - but should not ALWAYS be used for anything no more than a hammer should be used for anything that needs a tool of any kind.

If you treat your portfolio as a true portfolio rather than a group of individual investments - options are not needed for this purpose. For instance, my portfolio is 34% Bonds, 16% Gold and Silver (represented by CEF) and 50% Dividend-Paying Stocks and MLPs.
These ALL move in low correlation with each other. When one of them gets out-of-balance within the portfolio - I re-balance to correct it. I buy more of what is lower and (unless I am adding enough cash already - I still add cash monthly) sell some of what is higher to make the difference. This has the advantage of forcing me to sell high and buy low without using options. I check to see if the portfolio needs re-balancing every 2 weeks. Doing this also means that I do not need to check the portfolio daily (Although I do most of the time anyway.) - checking it every 2 weeks is enough in just about any market. It works well for me. Think about it."

4 Reasons Investors Shouldn't Rely on Fixed Income ETFs

Some questions, time permitting, for authors Michael and Jimmy and interested commenters. The August 23rd remarks are quoted for convenience and because I cannot put (no pun intended) it better.

Do you think that ETFs should always be protected with Puts?

I am also curious about Gold ETFs and the strategy sketched below as I read today that while a dip is probable " ... gold is expected to break out to the upside and embark on a significant uptrend soon, so our strategy is to go long gold, possibly gold ETFs, and selected gold stocks and to protect these positions with cheap Puts, but the possibility also exists for skilled traders to go for a straddle option strategy, the idea being that the gains on the Calls should far exceed the losses on the Puts, the Puts being bought as insurance in case gold breaks down - if it does the Puts should be liquidated once they have made sufficient gains to cover the cost of the Calls. This strategy, which assumes the Puts are not being used to protect long stock positions, could be very profitable indeed in a whipsaw situation, as if the Puts are sold when they have gained enough to cover the cost of the Calls, and the market then rapidly reverses to the upside, which is what we would expect, the Calls will have been obtained for nothing." (Thanks to Clive Maund)

Worth another moment or two perhaps, is his conclusion: (again thanks to Clive)

"To conclude: the time is thought to be ripe to go flat out long gold and gold related investments. This is a train you can and should board BEFORE it starts to leave the station. However, there remains the risk that gold could instead break to the downside first but if it should do so there is thought to be a high chance that it will be the handiwork of Big Money deliberately shaking small investors out before a breakout to new highs. Although the gold COT did show a marked improvement last week, Commercial short and Large Spec long positions are still at a higher level than we would like to see ahead of an upside breakout. The latest Silver COT in contrast shows a marked increase in Commercial short positions and Large Spec long positions, adding weight to the argument that we had earlier set out to the effect that Big Money may be planning to ambush the little guy before the Precious Metals start their next major uptrend. Accordingly long gold, ETF, and stock positions should be protected by out-of-the-money Puts (ETFs should in any event be protected with Puts), which are or should be cheap at this time due to the recent low volatility, which need not be in the same security - for example GLD Puts can be used to protect bullion. Straddle option positions are very attractive at this time for traders with the appropriate level of experience and understanding as gold has essentially been in a giant trading range for 20 months, and is approaching the apex of a 6-month long Triangle, making a big move probable soon. In the event of a sharp drop the Put side should be sold once the cost of the Calls is covered - the Calls are then free."

Thnk you for your time and courtesy.