What does it cost to insure a portfolio?
Downside protection has a computable price. This prices it the way it actually trades: volatility taken from a skewed surface rather than a single number, a strike the exchange may genuinely list, and the spread and fees a buyer really pays.
The whole calculation runs in your browser. Your holdings are never sent to us, including when you request the analysis by email.
Equity exposure you want covered. One contract covers roughly $59,000, so the hedge is sized in whole contracts and the rounding is reported.
Cash settlement and European exercise remove assignment risk. The ETF option carries both.
The value below which losses are covered. At 90 per cent the portfolio absorbs the first 10 per cent, which is the deductible.
Time to expiration. The volatility term structure is anchored across this range and interpolated between the anchors.
A portfolio of single names is not the index. Enter what you hold and the hedge is sized to its beta, and the page reports how much of your risk an index put can actually reach.
| Ticker | Weight % | Beta | Remove |
|---|
Betas are illustrative starting values, not measured ones. Edit any of them, and type your own for a ticker the list does not carry. Leave the table empty to price against an index fund at a beta of one.
Priced on an illustrative calm-regime snapshot.
An index put covers the part of your risk that moves with the index. The rest is single-name risk, and no index put touches it.
| Source of risk | One sigma | Share of variance |
|---|
A screen shows you the theoretical value. A buyer pays the offer, and then pays fees.
| Component | Per share | Position |
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Annualised cost is not flat in horizon, and assuming it is may be the most common error in hedging arithmetic.
| Horizon | Strike | Cost for period | Annualised |
|---|
A protection level fixed as a percentage of spot sits many standard deviations away at one month and well under one at a year. That, rather than the term structure, is why the annualised figure moves the way it does.
Available to wholesale and sophisticated investors. This research is not available to retail investors.
- Net assets of at least AUD 2.5 million, certified by a qualified accountant within the last two years.
- Gross income of at least AUD 250,000 in each of the last two financial years, certified by a qualified accountant.
- Or you otherwise qualify as a wholesale client under the Corporations Act.
That link carries your inputs after the #, which browsers never send to a server. It rebuilds this analysis on any device and reaches nobody but you.
How this is computed
Every number on this page is produced by the same library that produces the figures in the underwriting research, ported to run in your browser. The two implementations are held to agreement by a parity harness that compares them across roughly fourteen thousand values before either is allowed to publish.
The market snapshot
An illustrative calm-regime snapshot, not a live quote. The risk-free rate is 4.25 per cent, the dividend yield 1.30 per cent. At-the-money implied volatility runs from 13.2 per cent at one week to 19.0 per cent at one year, interpolated log-linearly between anchors, which is what contango looks like.
Using a published snapshot rather than a live feed is deliberate. It makes the page reproducible, so a reader can argue with the inputs, and it avoids a market data redistribution licence. The trade is that these are not today's prices and the page never claims to be.
Skew, not a flat volatility
Volatility is read off a surface in standardised moneyness, so a strike below spot carries a higher implied volatility than the money. This is the whole reason downside protection is not priced like upside, and pricing a hedge off a single at-the-money number understates it materially.
Strikes you could actually trade
A protection level is a percentage, and a percentage of spot almost never lands on a listed strike. Every strike here is snapped to the exchange grid: one dollar at or below 200, five dollars above it for the index product. A listing interval is a permission and not a guarantee, so a listable strike may still be untradeable in size.
Frictions
The bid and ask are modelled around theoretical value at the top liquidity grade, a full width of 0.6 per cent of value floored at two and a half cents per share. A buyer lifts the offer. Commission and exchange fees are charged at entry on an illustrative retail schedule, and the position is priced held to expiration, where an index put either settles or expires. Rolling the hedge adds a further entry each time and the figures here do not include that.
What this deliberately leaves out
- Basis. Your portfolio is not the index, and a hedge on an index covers only what your portfolio shares with it.
- Financing, margin and the opportunity cost of the premium.
- Tax, which changes the answer and is specific to you.
- Early assignment on the American-style contract, which is a real cost and is not modelled.
- Any structure other than a single long put. Collars, spreads and ratios all price differently.
General information, not advice. This tool computes the cost of a hypothetical position under stated assumptions. It does not take account of your objectives, financial situation or needs, it is not a recommendation to enter any transaction, and it is not an offer of any financial product.
The figures are illustrative. They rest on a published snapshot rather than live market data. Real prices differ, sometimes by a great deal, and most in exactly the conditions where protection matters.
Zentra Asset Management is a pooled investment fund that trades regulated derivative products under Yellowfin Asset Management Pty Ltd (ACN 607 959 580), a Corporate Authorised Representative (CAR No. 1322066) of Cutting Edge Wholesale Pty Ltd (ACN 658 904 226), AFSL 700112. Available to wholesale and sophisticated investors.
The research behind the numbers
The pricing library on this page is the one behind the underwriting explainers, where the same arithmetic is worked through in full.
Read the underwriting research