Continued from page 1

A: It’s understandable, given the dramatic surge in the stock market valuation, that investors are looking for a means to protect themselves against a decline. An investor who feels that six months from now there will be better clarity regarding market volatility could purchase put options on the S&P Deposit Receipts (SPY), whose performance mimics the S&P 500 index. Currently, SPY trades for about $106. A March put option on SPY with a strike of 100 can be purchased for $5, effectively protecting against a decline in SPY below $95. SPY last traded below $95 on July 22.

Chris Versace is director of research at Think 20/20 LLC, an independent research and corporate access firm based in Reston. He can be reached at At the time of publication, Mr. Versace had no positions in companies mentioned. However, positions can change.