Record-breaking annual equity inflows of $448 billion, according to Bank of America, continue to push the major indices higher. The S & P 500 has now seen seven consecutive weeks of inflows, keeping the post-election momentum intact. I want to use the S & P 500 SPDR Trust ETF (SPY) to hedge these gains and bet against the consensus of markets finishing the year on a high note. SPY YTD mountain SPDR S & P 500 ETF Trust, YTD Investors have rejoiced with expectations for a more business-friendly economy ahead following President Elect Donald Trump’s victory in early November. Markets have had a historic run in back-to-back 25% or more years in 2023 and 2024. My short-term view of a shallow repricing in the S & P 500 might come to fruition now that we have Nvidia’s earnings in the rearview mirror. The overarching theme that has not weighed on markets yet is interest rates. I believe the 10-year note yield has the ability to continue its ascent higher, pressuring the stock market. US10Y YTD mountain 10-year Treasury yield, YTD With the Cboe Volatility index roughly trading at 16, option premium is not expensive for those investors who want to buy a little insurance. The trade I want to use SPY put options to define my cost of insurance and in the event the markets continue on this run, my puts will expire worthless yet my equity exposure will capture some of the move. Bought the 12/06/2024 $585 put option for $2.30 This trade was executed when SPY was trading just under $596 Each put option will cost an investor $230 DISCLOSURES: (Long SPY, Long SPY puts) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
