Investors who aren’t yet hedged, and are interested in cost-effective portfolio protection, can consider buying the VIX September 32.50 call and selling the VIX September 37.50 call. When Schwartz modeled the trade, the VIX hedge cost less than $1 during Friday trading, and it provides protection through the bulk of September, which is historically the trading year’s most volatile month. Why? All of the market’s great crashes have occurred in October.
Stephen Solaka, managing partner of Belmont Capital, a Los Angeles money-management firm, advised clients to “collar” their portfolios with SPDR S&P 500 ETF Trust (SPY) options. When SPY was at 119.75, Solaka advised selling the SPY September 124 calls and buying the SPY September 113 puts to protect portfolios against further market declines.
In times like these, the hedge is your edge.
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