HOW TO ATTACK PANIC

摘要

On Feb. 23 investors pushed the Dow Jones industrial average down 250.89 points to arn12-year low, only to see it gain back 236.16 points the next day. What can investors with itchy trigger fingers do so that market panic doesn't get the best of them? Lawrence Glazer, managing partner at Boston's Mayflower Advisors, recom-rnmends that they sell covered calls-options contracts that require the writer to sell a stock he owns if it trades above a certain price-as a form of hedging. For example, an investor withrn100 shares of the SPDR S&P 500 exchange-traded fund, which tracks the performance of the Standard & Poor's 500-stock index, could write a call option that requires him to sell those shares if the S&P trades above 770 on or before Sept. 30, if the buyer chooses. At the current price of $8.10 an option, the seller would make $810 for every 100 shares hedged, giving him a 10% cushion if the market takes a tumble. The strategy has its downside: If the market rallies, the seller has capped his upside at 10% because the buyer of the call will exercise the option and claim the stock. For that reason, Glazer recommends that investors sell only enough covered calls to ease their worries about losses-especially because the largest gains tend to occur early in a recovery. "You're going to give up the home run," Glazer says. "But it's a way to stay in the game."