My goodness, how much higher can the wall of worry be?
There are so many uncertainties out there: Ebola virus, Middle East conflict, ISIS terrorist threats, Russia/Ukraine, a potential global slowdown, Europe trying to re-ignite their economy, Hong Kong protests, weak Germany (lynchpin of Europe) and major turmoil in Brazil.
Whew! Anything else? Oh yeah —a strong dollar that has clipped commodities such as oil, gold and other soft goods. The Fed is also ready to move into the next phase, which may be bearish for stocks. A market near all-time highs with all of this to worry about? Sounds like it’s time to hit the sell button.
But do you abandon the market altogether without a strategy or plan? Of course not, and given the fact markets have sold off sharply over the last two weeks and is still standing says this could just be a corrective situation. However, the fear of any of the above situations getting out of hand is clearly there and we have to play it accordingly. In fact, market volatility has been rising sharply and will stay elevated until some of these situations are resolved or just reduced.
Use Puts For Protection
Buying some protection against a long portfolio of stocks or options is always a smart choice, especially in times of turmoil. Fortunately the cost of protection is rather inexpensive (VIX at 16%), so picking up some SPY, QQQ or IWM puts are a good way to insure against a potential fall in prices.
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Learn more about Lang’s option trading service: Explosive Options
