SPY Put Options
Last Updated On: January 1, 2019
Option Price On This Date: $64.88 USD
Put options on an S&P 500 tracking fund.
To help cushion the blow from a major market downturn, I have bought a significant number of put options on the SPY ETF which closely tracks the performance of the S&P 500. These put options have a strike price of 315 (equivalent to 3150 on the S&P 500) and expire Dec 20, 2019. They give me the right, but not the obligation, to sell SPY units at 315 on that date. If SPY is trading significantly below that price on that date I could theoretically buy the SPY units at the existing price and turn around and sell them at 315, making a profit in the process. In practice, however, this is not really feasible as I would need a large chunk of cash set aside to make the initial purchase. So in practice, I would be much more likely to sell the options themselves prior to the exercise date. The options are heavily traded and can be sold at any time. Generally speaking, as the S&P 500 declines in value, the value of the put options should rise, thus hopefully providing some offset to the decline in the value of my long positions in individual stocks.