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TEN Exclusive: Would you drive a Porsche without insurance?

 Needless to say, over the last fifteen years we have seen market movements that have been quite volatile. Events such as Long-Term Capital Management, the Asian Crisis, dot.com bubble, mortgage bubble, and the European crisis can make one reconsider if the markets are the right place for us. Buy and hold strategies of the past seem as antiquated as the days when we actually had to get off of the couch to change the television channel. Yes, at one time that was necessary.

In these current markets you need to have protection. You would not drive that valuable automobile without insurance, but why do so many people insist on doing it? The problem is a lack of real knowledge of the subject. The strategy we feel is most effective is the use of stock options to hedge your portfolio. Yes, you can always use protective stop orders, but that will always lead to a loss. You could also employ the use of short indexes, but do they really apply to your portfolio? There may be a correlation, but not always in sync with your strategies. You need to have a coherent plan in place whenever you enter a new position. Using an ad hoc approach will usually lead to disaster. Here is an example of how we feel you should safeguard yourself.

Trade Example

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Disclosure: No Positions