sport football: The Best Way to Hedge Your Portfolio Against Further Downside Movement

Kamis, 02 April 2020

The Best Way to Hedge Your Portfolio Against Further Downside Movement

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April 2, 2020

The Best Way to Hedge Your Portfolio Against Further Downside Movement
By Tom Gentile

Dear Reader,

After crashing over 2% yesterday, the markets opened this morning in the green - and have been rising ever since.

That said, one day of gains doesn't mean it's all up from here. As I laid out yesterday, we could still see the market retest its lows once again - meaning now is a good time to put a hedge on your portfolio.

A hedge is essentially a way to protect your portfolio from any downward price movement, making it a valuable asset in volatile times like we've seen the past several weeks. And one of the best ways to hedge your portfolio is with the SPDR S&P 500 ETF Trust (SPY).

The SPY tracks the S&P 500, and it's the most liquid exchange-traded fund (ETF) there is, with the highest open interest of options.

To hedge your portfolio with the SPY, you could use a low-risk, high-reward strategy called a butterfly spread.

This three-legged play is just a series of vertical spreads layered on top of each other. First, you buy two options with two different strike prices - one higher, one lower. Then, on the same order, you sell an option with a strike price that's between the two that you bought.

Now, you will sell the same amount of contracts that you bought. For example, if you bought one contract of each option, then you will sell two contracts. And they all have the same expiration date.

I know that the market's crash left a lot of investors' portfolios high and dry. By placing a butterfly spread on the SPY, you could end up making enough money to more than make up for what the market's downward movement has taken away.

Good trading,

Tom Gentile
America's #1 Pattern Trader

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sport football

Kamis, 02 April 2020

The Best Way to Hedge Your Portfolio Against Further Downside Movement

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