Here’s A Way To Cheaply Protect Against A Market Downturn

Investing Strategies, Markets
by Jay Soloff
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Hedging against downside protection can be expensive. Using options can alleviate some of the cost by utilizing a spread trade, such as a butterfly.  A trader recently placed a large put butterfly on for August in SPDR S&P ETF (SPY) options.  The trade only cost 20 cents in premium but could pay out significantly more if the market drops near 52-week lows over the next few weeks. 

Author: Jay SoloffJay Soloff is the Options Portfolio Manager at Investors Alley. Jay is also the editor for 48-Hour Income, Options Insiders, and co-editor of Weekly Income Accelerator and POWR Income with Tim Plaehn. Prior to joining the online investment world, Jay was a floor trader and market maker on the CBOE, the world's largest options exchange. His experience includes trading a multi-million dollar options portfolio in equities options as well as serving as a consultant to Wall Street options trading groups. Jay also spent time as a senior analyst at a hedge fund of funds, where he analyzed professional options funds as well as traded option strategies for hedging purposes. All told, Jay has 20 years of options trading experience. He received his undergrad degree in Economics at the University of Illinois - Champaign, and his MBA and Master of Science in Information Management from Arizona State University.
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