The markets are up - a lot, in fact! Much like the previous couple of years, has seen a lot of market volatility. Whether the correction will be only a few percentage points or something much bigger, investors and traders want protection, but is now the time to hedge?

Investors can protect their profits in a variety of ways, but retail investors often hedge by short selling or buying put options. A better way to protect against a market downturn is through the purchase of put options. A put option, much like short selling , gains value when the underlying index loses value.

The downside to a put option is that options decline in value over time, but since this will likely be a short- to medium-term position, purchasing a put option that doesn't expire for four to six months can help mitigate the time decay problem. Possibly the easiest way is to look at the CBOE Volatility Index , what traders call "the VIX. Options are priced largely with volatility in mind; the more volatile the market is expect to be, the more expensive options will be if you're a buyer.

On August 17, the VIX hit a low of Its 52 week high was in October of , when it reached This makes the expected level of near-term volatility low, making the purchase price of options relatively cheap. Investors know hedging while the market is still healthy represents the best value.

But Is Now the Time? If you listen to the financial media and read any number of newsletters, you've likely heard that September is historically a bad month for the stock market. According to MarketWatch, September has seen an average decline of 1. Investment professionals, including veteran hedge fund manager Dennis Gartman, are growing skeptical of the current market rally.

Why I Don't Like To Buy S&P Puts As 'Insurance' - A Rebuttal - SPDR S&P Trust ETF (NYSEARCA:SPY) | Seeking Alpha

Gartman noted in a CNBC interview that hedge funds and institutional traders had ramped up their commodities weightings and that's where he wanted to be as well. He may believe that the market is overextended but he's not willing to bet against it just yet. Gartman, like other professionals, know that charts and other indicators may signal an overbought market, but that doesn't mean a pullback is imminent.

The Bottom Line As interest rates have fallen, Americans have refinanced their homes in record numbers because a lower interest rate represents a better value. While put options are cheap, protecting your portfolio represents the same kind of high-value purchase that won't be available once the market enters a correction phase.

Although there are many ways to use options to protect your portfolio, buying individual put options is simple, relatively inexpensive and allows you to decrease the overall volatility of your portfolio.

SPDR S&P (SPY) Option Chain - Stock Puts & Calls - idonayojujid.web.fc2.com

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Is Now The Time To Buy Put Options? By Tim Parker Share. Learn how to find and use the most cost-effective ways to transfer risk. A thorough understanding of risk is essential in options trading.

So is knowing the factors that affect option price. Learn the best ways to profit and hedge using the Chicago Board Options Exchange Market Volatility Index.

Discover a new financial instrument that provides great opportunities for both hedging and speculation. Options offer alternative strategies for investors to profit from trading underlying securities, provided the beginner understands the pros and cons. A brief overview of how to profit from using put options in your portfolio.

Learn about different hedging strategies to reduce portfolio volatility and risk, including diversification, index options Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options.

Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets Learn about investing in put options and the associated risks. Explore how options can provide risk, which is precisely defined Learn about stock index options, including differences between single stock options and index options, and understand different An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

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