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Schwab will not store or use the information you provide above for any purpose except in sending the email on your behalf. As an investor, you know that diversification can help you reduce overall portfolio risk. Investing in a basket of stocks that is well diversified across industries, geographies, and market capitalizations can potentially improve overall returns and provide some cushion against market downdrafts. However, diversification may not always provide meaningful protection. Some events pose "systemic risks" that can impact the entire market—a Federal Reserve monetary action or a significant geopolitical event, for instance. And as we learned during the depths of the financial crisis, many stocks can move in tandem during serious market swoons. So diversification, while certainly helpful, can't be counted on to snuff out risk entirely. Another way to help protect the value of your stock investments is to use stock index futures and options. Here, we'll take a look at what they are, when you stock want to consider them and how to calculate the appropriate number of contracts for hedging. Companies and individuals trade stock index futures for different reasons, but the primary goal is to profit from—or protect against—changes in options price of the underlying indexes. You're concerned about a possible market decline but don't wish to sell your stocks just yet—perhaps due to tax reasons or to avoid missing out on dividend payments. Or maybe you believe in the long-term potential of stock stocks in your portfolio, even in the face of a general market decline. In this situation, selling index futures contracts might provide an approximate hedge. If the market declines, your short futures position may yield profits to offset the losses on index stock holdings. If the market rallies, the futures position may produce losses that would offset appreciation in your stock portfolio. The hedged position is generally stabilized in value until you remove the hedge. This calculation provides an approximation that's adequate for most individual investors. Want to get more complex? More complete hedge coverage requires a calculation of your portfolio beta—a statistical comparison of the portfolio's changing value to the changes in the relevant index value over time. A portfolio beta of 1. A portfolio beta of. Let's look at our example again. Full coverage with futures would require the sale options 11 contracts. If you later decide to increase or decrease the size of your portfolio, recalculate the needed coverage and adjust your hedge accordingly. A hedge doesn't need to neutralize an entire portfolio—you might want to consider phasing in a futures or options hedge. When you feel that the market is poised for a recovery, remove the hedge by phasing it out in a similar manner, or by offsetting the entire position. You can constantly make adjustments in this fashion, depending on how your market outlook changes. If you have experience with equity options, you'll find options on stock index futures to be similar. All the same principles and fundamentals apply, though in the case of options on futures, the underlying is a futures contract, rather than an individual stock or a stock index. Another possible alternative is to hedge using options. By buying 11 put options, you could defend against a large decrease in the value of the portfolio, while still maintaining your profit potential less the cost of the put purchase if the market were to rise. To set up this strategy, you would buy the number of puts dictated by the short futures hedge ratio calculation. The degree of coverage is determined by the choice of the strike price. Higher strike puts would be more expensive than lower strike price puts, but the protective feature of higher strike puts becomes effective much sooner. The hedger is therefore faced with the decision of how much protection to take on, and at what cost. The principal reason to sell or write call options is to earn the premium. The call writer's risk is unlimited, while the call buyer's risk is limited—and the call writer's profits are limited, while the call buyer's profits are unlimited. In periods of stock or declining markets, call writing can mean an attractive cash flow from a relatively index capital investment. The hope is that, at expiration, the settlement price of the futures contract will be at or below the exercise price of the option. The option will then expire worthless—and you keep the entire premium. The premium also gives limited protection against a drop in the futures price. The risk is that the value of the stock portfolio might decline by more than the premium received, and the trader may experience a net loss. However, depending on the strike price of the sold calls, the underlying stocks may rise in value without incurring a loss on the call options. Investors should also note that if the market rises above the strike prices of the short calls, you may miss out on a market rally, as gains on the stock portfolio may be largely or entirely offset by losses on the short call position. Stock index futures and options offer investors numerous investing and trading opportunities—and in a declining or volatile stock market, they may be used as a hedging vehicle to help protect the value of your stock portfolio. Like any other investment, the ultimate decision of whether or how to incorporate stock index futures into your portfolio should be based upon your personal goals and risk tolerance. But it's important to know that futures and options strategies like those described in this article are available to individual investors. I hope this enhanced your understanding of futures trading. I welcome your feedback—clicking on the thumbs up or thumbs down icons at the bottom of the page will allow you to contribute your thoughts. Learn more about futures trading at Schwab. Learn more about Schwab Trading Services. Schwab does not make futures and futures options trading available to customers in Schwab accounts. Schwab customers interested in trading futures are referred to optionsXpress, Inc. Schwab and optionsXpress options separate but affiliated companies and subsidiaries of Options Charles Schwab Corporation. Trading futures involves substantial risk of loss and is not suitable for all investors. Stock performance is not indicative of future trading results. Commentary and analysis is based on information taken from trade and statistical services, news services, and other sources which the author options are reliable. Neither Schwab nor the author guarantee that such information is accurate or complete, and it should not be relied upon as such. Commentary and analysis reflects our good faith judgment at a specific time and is subject to change without notice. All stock decisions in futures and futures options contracts will be made on a strictly unsolicited basis by the account holder. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an index strategy for his or her own particular situation before making any investment decision. Commissions, taxes and transaction costs have not been included in the examples used in this discussion, but can affect final outcome and should be considered. Please contact index tax advisor for the tax implications involved in these strategies. Call to request access a Schwab brokerage account is required. Schwab reserves the right to restrict or modify access at any time. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Futures trading carries a high level of risk and is not suitable for all investors. Certain requirements must be met to trade futures. Diversification strategies do not ensure a profit and do not protect against losses. Any written feedback or comments collected on this page will not be published. The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its banking subsidiary, Charles Schwab Bank member FDIC and an Equal Housing Lenderprovides deposit and lending services and products. Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons. This site is designed for U. Learn more about our services for non-U. Unauthorized access is prohibited. Usage will be monitored. Expanded accounts panel with 5 nested items Overview Checking Account There are 1 nested list items FAQs Savings Account Home Loans There are 7 nested list items Today's Mortgage Rates Purchase a Home Refinance Your Mortgage Home Equity Line of Credit Mortgage Calculators Mortgage Process Start Your Loan Pledged Asset Line There are 1 nested list items PAL FAQs. Find a branch Contact Us. Midweek Market Trend for June 14, Fed Raises Rates, Sticks With Plans for One More Hike This Year Are bonds signaling a major stock market peak? Goldilocks…or the Three Bears? Technology—Too Far or Room to Run? You can do this in two ways: Select your online service with one of these buttons. Copy the URL in the box below to your preferred feed reader. Learn how to calculate the appropriate number of futures contracts for hedging. Schwab clients may trade stock index futures in their optionsXpress accounts. Please try again in a few minutes.
Yang, Xiaoqin (2012) Prevalence of pulmonary arterial hypertension in persons with connective tissue diseases, medication use patterns, and health care utilization.
He sounded like all he had to do was be elected, then float somewhere above, and the lower officials would somehow do the right things — as he described Mayor Daley doing.
Yang, Xiaoqin (2012) Prevalence of pulmonary arterial hypertension in persons with connective tissue diseases, medication use patterns, and health care utilization.
He sounded like all he had to do was be elected, then float somewhere above, and the lower officials would somehow do the right things — as he described Mayor Daley doing.