For Daryl Liew, head of portfolio management at REYL Singapore, owning protective options has finally paid off.
Late last year, Mr. Liew started buying put options tied to the S&P 500 that guard against a limited drop in the U.S. index for clients who were worried about a pullback. He told those nervous clients that owning a hedge that pays out when stocks drop was a better way to protect their portfolios than getting out of stocks completely.
Put options grant the holder the right to sell a stock at a specific price by a certain time.
“We had been putting in hedges all the way from third quarter of last year. It was a cost,” he said.
“Every month, you’re just paying for hedges and nothing happened,” he said.