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Mike Khouw suggested an options strategy that could help investors to protect their portfolios in case of a flash crash. He explained that most people's portfolios resemble the performance of the S&P 500 and he thinks that the best way to protect from a big single day decline is by purchasing options in
SPDR S&P 500 ETF TrustSPY.
Khouw would buy the August 210 put for $6.75 and sell the August 189 put for $2.00. The put spread would cost him $4.75 and maximal profit would be $16.25. Khouw added that a total cost of the trade is just above 2 percent of SPDR S&P 500 ETF Trust.
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