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| Advisors' Forum |
Bearish Portents
06/01/2005
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Focus on solutions that minimize costs while maintaining as much flexibility
as possible to deal with future market conditions.
For option hedging, there
are two basic ways to go: custom options or market index options. Market makers
can tailor a solution specific to your situation; it will be expensive and limit
your future flexibility. Index options are less costly, but may not provide a
sufficient hedge.
Additional issues should be considered. With capital gains
taxes at only 15 percent, should you just sell some stocks? Would buying an
interest in oil and gas production satisfy the hedging needs? A more basic
question to ask: Although a downturn of greater than 10 percent is disturbing,
unless you must liquidate in the downturn, the loss is only temporary—so how
much hedging is appropriate?
David Diesslin, Diesslin & Associates,
Fort Worth, Texas.
Send Us Your Questions. Are you wrestling with family issues, business
governance or succession decisions, investment or estate planning dilemmas,
problems related to philanthropic activities or foundations, or a similar
predicament? We invite you to email a detailed question to advisorsforum@worth.com.
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