An Interesting And Inexpensive Hedge Against Downside Risk

| November 3, 2022

hedge

Hedging against a big stock selloff can be expensive when using options. One way to reduce the cost is by using options spreads. A more complex spread that can be useful in this situation is a put butterfly.

A strategist bought over 20,000 put butterflies in SPDR S&P 500 ETF (SPY) that expire at the end of November. The position can pay off if the market drops about 20%, which is why this is likely a cheap hedge against an unknown event.

Watch this short video to learn more.

This post originally appeared at Investors Alley.

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Category: Options Trading Strategy

About the Author ()

Adrian Collins works as an Outreach Manager at Option Dash. Option Dash is always looking forward to offering the best covered call and cash secured put screener on the internet. Adrian is passionate about spreading knowledge on stock and options trading for the rising investors.