Always Hedged – We seek to limit losses on a calendar year basis, and especially during bear markets, by purchasing longer-term put options (LEAPs), at- or near-the-money, on the entire underlying ETF portfolio. We use only longer-term puts, which offer the greatest cost efficiency and stability.
We maintain portfolio protection by rolling the hedge annually, so the DRS is not under duress to seek protection in bear markets.
Also, during significant market declines (around a 20% decline from prior hedge position), we reset the hedge by selling the deep-in-the-money put for a profit and buying a new LEAP on the portfolio at- or near-the-money. The sale of the initial hedge in such instances generates capital we then use to acquire additional equity at a market low.