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 cversace@washingtontimes.com. At the time of publication, Mr. Versace had no positions in companies mentioned. However, positions can change.