Pro­tec­tion for your port­fo­lio

Finweek English Edition - - HOUSE VIEW - BY SI­MON BROWN

A LOT OF peo­ple have been ask­ing me if I am ner­vous about the cur­rent mar­ket con­di­tions and the an­swer is no. Not be­cause t he mar­ket doesn’t l ook trou­bled, but be­cause I in­vest so I can sleep well.

That said, my lazy weekly sys­tem is 100% in cash for the first time in five or six years. That may be mean­ing­less or may fore­tell some­thing. As I al­ways state, I con­tinue to hold the awe­some stocks in my port­fo­lio and have been ex­it­ing the “less awe­some” stocks over the past few months - as I have writ­ten here.

But for those want­ing some pro­tec­tion for their port­fo­lio, a long date put op­tion is a nice and easy in­sur­ance op­tion that will ap­pre­ci­ate in value as the mar­ket falls (los­ing money if it rises).

TOPSBT ex­pires in April next year and has a cur­rent gear­ing of around -3x, so for ev­ery 1% de­cline in the Top40 In­dex, the war­rant will gain about 3%. It’s gen­tle and can be bought via any JSE bro­ker. But cau­tion, if the Top40 is above 60 000 in April it will ex­pire worth­less.

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