facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause

How Hedging Works


1-Minute Video:


Because markets are so volatile, it’s difficult to pursue a growth strategy and still protect against a downturn. At OakTree Premium Finance we utilize life insurance policies with an option hedging strategy – that can help make that possible. Let’s say you pay a premium of $10,000 and instead of investing it in the stock market, the insurance company places the majority in a general portfolio, mostly high-grade bonds.

The general portfolio is designed to grow back to the original $10,000, using conservative bond yields, and it protects the policy’s value. A small amount of the premium is used to purchase an Option Hedge strategy on a market index to pursue growth.

If the index experiences growth, the options are exercised, potentially giving the policy value a higher interest credit. If the index remains flat or loses value, the options expire and only the option purchase price is lost. The rest of the premium invested in the general portfolio is protected from market losses, though fees may affect the policy value. This strategy lets you pursue growth when times are good and offers downside protection when times are bad.

To find out more about OakTree Premium Finance strategies, call us for a no obligation consultation today.

Jim Barlow

OakTree Premium Finance

385-393-4775

Financial Advisor in Davis County UT

Wealth management, retirement planning and estate planning