Mike Khouw's SPDR S&P 500 ETF Trust Trade

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On CNBC's Options Action, Mike Khouw suggested an options strategy that offers protection for a long stock portfolio.

Khouw thinks that a put spread in SPDR S&P 500 ETF Trust SPY would be the best strategy, because options premiums have increased. He would buy the December 31, 188 strike put for $8.60 and sell the December 31, 170 strike put for $3.60. The put spread would cost him $5 or a little over 2.5 percent and it offers protection of $13, below $183. Khouw added that a long stock position would probably pay some dividends.

Posted In: CNBCOptionsMarketsMediaMike KhouwOptions Action
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