Volatility Comparison Message
From the Desk of Daniel Haugh, President - PTI Securities
November 16, 2007
There is nothing like a down market with very large price swings to scare investors. So far this month, as of last night’s closing prices the S&P 500 had a loss of 6.3%, the Russell 2000 index down 6.6% and the Dow down 5.9%, and that is just for November. Couple that with the options expiration today and FedEx’s statement on lackluster holiday shipping, this may create a great trading environment, but it puts tremendous strain on investors that are long the market.
If the market does in the next two weeks what it has already done in the last two weeks, most investors will have violated their risk parameters of a 10% – 15% risk and their alternatives at that point are not good.
I would like to highlight one of the programs that we talk about at investment seminars - PTI’s Protected Index Program®. For our PIP clients that are in the SPY, each of them has protected puts in place and is selling calls against them. These accounts are down less than ¼ of 1% this month, a loss that is 25 times less than the index, and our return for the year is over 8% where the index is up about 2%. For clients in the Russell 2000 index, which has more volatility our year-to-date gain is over 10% even though the index is down on the year.
This substantial out-performance
is not due to us "getting lucky" on one stock pick, or being totally
dependent upon the market going up. It is due to one thing: a constant emphasis
on limiting risk, so when the market does what it is currently doing, your capital
(including gains already made) are insured.
Please take this opportunity to review the PIP strategies or call our trading
desk toll free at 800-821-4968.
Dan