Trade UltraShort S&P 500 Index (SDS) As A Hedge
We set up a ProShares UltraShort S&P500 Index (NYSE: SDS) a short-term (44-day) bear market option play - investors could:
Buy SDS December 16th expiration $17 strike calls for approx $1.00 (Based on Wednesday’s closing quoted bid/ask mean)
Our target price to the upside is $24
The maximum risk for this trade is the 1.00 per share. The maximum profit is approximately $6.00 per share if the UltraShort S&P 500 ETF reaches our target price prior to the option contract expiration date. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
Investors nervous about the possibility that a Trump election victory will lead to a market correction are taking precautions. A Reuters equity market poll last month showed a majority of forecasters predicted that U.S. stocks would perform better under a Clinton presidency than a Trump administration. The presidential race that appeared to be a probable Clinton victory is now a tossup. The market responded with seven consecutive days of losses in the S&P 500 and has fallen to its lowest level since early July.
There is a lot of room for stocks to keep falling depending on who wins the presidential election and what the FOMC decides to do at their December meeting. Investors are investing heavily input option contracts for protection if in fact Trump wins and the market does crash. A cheaper alternative is to use the ProShares UltraShort S&P 500 Index ETF (SDS) as a simple hedge or protection for bullish stock positions. Buying SDS calls is a low-risk-high-reward opportunity if the stock market follows through on bearish signals.
52-Week High: 24.41
52-Week Low: 16.23
Disclaimer: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be ...
more
Comments
