A week ago I gave you details on how to use stock options to create the perfect hedge against a market crash. Last Monday, a mini-crash took place. It was the worst day for the market all year. While the market (SPY) fell 2.3%, VXX rose 7.6%. The Crash Control portfolio I set up as a hedge against a crash gained 18%, and is poised to gain at an accelerated rate if the market continues to fall.
The market totally vindicated my analysis.
First, the high inverse correlation between VXX and the market came true, and the options strategy we set up using VXX as the underlying had a high correlation with the price of VXX. So when the market tanked, the Crash Control portfolio prospered.
The great thing about this market-hedge options portfolio is that it is designed to make a small profit even if the market doesn’t crash. It’s like buying insurance and getting a settlement even though the bad event that you bought insurance for didn’t actually happen.
A Timely Test of the Ultimate Hedge Against a Market Crash
The link to the follow-up on the options market hedge strategy is:
I suspect you will find this market-crash options strategy is so complex that you would be happier just subscribing to Terry’s Tips, sign up for Auto-Trade, and have thinkorswim execute the trades for you in your account.
Tags: Auto-Trade, Bearish Options Strategies, Calendar Spreads, diagonal spreads, Market Crash Protection, Monthly Options, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, VIX, Volatility, VXX, Weekly Options