Hedging tech exposure via NDX options
The guest argued that investors seeking to hedge portfolios dominated by mega-cap tech should use Nasdaq 100 (NDX) options rather than S&P 500 (SPX) options to avoid basis risk.
The argument
The speakers noted that many investors mistakenly buy SPX puts to hedge portfolios that are heavily concentrated in names like Nvidia and Apple. Because the NDX lacks financial constituents and has a higher concentration of mega-cap tech, its options provide a more precise hedge for modern tech-heavy portfolios.
The thesis, stress-tested
✓ What validates it
- ✓Outperformance of NDX puts relative to SPX puts during a tech-led market drawdown
▸ Risks discussed
- ▸NDX options are notionally very large and expensive, making outright premium purchases costly
- ▸High volatility of the underlying index increases option premiums
Hear it yourself
"It's fair to say that the anything that's true of the Nasdaq 100 for the queues is also true of the Nasdaq 100 for the NDX index options that Kevin and I spend our time with."
00:00 / 00:12
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE