Possible Hedge

All the market geniuses seem to think we are do for a pullback. There are a lot of good reasons the market could or should go lower. You could use capital to buy SPY puts. This would give your portfolio downside protection.

You could also sell upside SPY calls and use the proceeds from that sale to buy puts. Essentially using the sale to give you the capital to do the buy.

Today you could sell the March 21 SPY 340 Calls for about 3.22 This is the equivalent of the S&P getting to 3400 by March 21. You could use that money to buy the SPY 318 Puts for 3.18. The next cost for this trade would be about $5.00 plus commissions.

The risk is if the market is sustained over 3400 plus the $5.00 cost of the position. The reward could be unlimited.

This is a hedge against a REAL market selloff. This would allow a trader to protect a long portfolio and allow themselves something in that portfolio that should go up in value IF the market has a real selloff.

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