Cost of Hedging Weekly Update 3-21-13

Posted on March 21st, 2013

Since our last post on 3-12, we saw the mid-term cost of hedging hit new lows at .82 bps. However after 4 out of the last 5 days being down, we’re starting to see a little expense sneak back in. As we sit this afternoon, the short-term costs stand at .78 bps per day and the mid-term costs at 1.00 bps per day. 
See data for the past 20 months on our Resources Page

There’s not a lot to say about the broad market trend as it has started to level out. That is partially due to the S&P 500 pressing up against a resistance level of previous highs. More importantly, though, is that we’ve moved into a news-driven cycle. It seems like the headline of the day is dictating performance.
The risk of a news driven environment is that difficulty arises in predicting the ‘story de jour’. As we’ve said many times before, we don’t time the market, so we stay hedged. That means we’re continuing to roll our hedges to new higher levels when they expire. It also means we’re locking in some of the gains the market has given us since November.  As we all know news isn’t relevant until it is and that is just the way the market goes sometimes.  

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