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Zhang: Consider buying near-term puts if you're concerned about tariff-related risk
CNBC Televisionยท2025-07-16 11:59

Market Volatility & Hedging Strategy - The market exhibits complacency with the VIX around 17%, presenting an opportunity for investors to hedge downside risk relatively inexpensively using out-of-the-money options [2][3] - Buying a 610 put on SPY or 6100 on SPX expiring in August would cost approximately 1% of the portfolio's value, offering significant downside protection [3][6] - Investors can offset the cost of downside protection by selling covered calls, potentially collecting close to 05% of the portfolio's value in the next 30 days [6][7] Trade War Scenarios & Options Plays - In a scenario where the EU and India don't make a deal and retaliate with tariffs, buying out-of-the-money put options is a simple way to hedge against this worst-case scenario [4][5] - If the trade deal deadline is extended, investors can roll out their options to September, continuously harvesting premium by selling upside calls and using the proceeds to buy downside put protection [8][9][10] - If countries capitulate and make a deal, the market is likely to react positively, and investors could consider selling downside puts and using the proceeds to fund buying upside calls for upside participation [11][12][13]