S&P Downgrade, European debt confusion. How options can help.

The S&P downgrade, the timing of which could not have been better to match the plethora of debt problems in Europe, are going to be a gold rush for options traders.

The VIX indicates major volatility in the S&P 500 options in the past week, and the news is only going to keep increasing it. Volatility will increase the price of option contracts; with ambiguous news coming from every source and I will buy December or 2012 deep out of the money Puts on SPY, and some US stocks. It’s also a good idea to buy protective puts on long positions you have, at least for the short term. As panic ensues in the confusion, I strongly believe these put contracts are the only safe haven.

A recession might be right around the corner, several indicators, including a head and shoulders pattern on the S&P 500 and  DJI  indicate that. However promises are being made by the Feds, or Banks in Europe that all hell will not break loose.

As of this time open markets in Asia and Europe are plunging, US markets will no doubt follow this same faith.

I will hold long, deep out of the money puts on spyder, for december as well as buying several protective puts on my investment tomorrow.

 

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