Benefits of Long-Term Hedging for Long-Term Investors

How Long-Term Hedging Help Investors Take Advantage of a Bear Market


long term hedge for long term investing

Unpredictable markets can make growing wealth and avoiding losses difficult. Put options are an effective way to manage and reduce this unpredictability. Even more effective are long-term put options, also known as LEAPS: Long-Term Equity Anticipation Securities.

A long-term equity anticipation security are options with expiration dates longer than 12 months. A LEAPS put option can be used as a long-term hedge, offering risk mitigation for a longer time horizon without capping potential upside.

An investment approach that utilizes a LEAPs put option as a long-term hedge, like the Defined Risk Strategy (DRS), has three distinct benefits for long-term investors.