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

Mike Khouw suggested on CNBC's "Options Action" an options strategy in SPDR S&P 500 ETF Trust SPY that could offer investors protection in case of a market decline.

Khouw said it would be a good idea to buy the December 276 puts for $4.50. The trade offers protection below $271.50 or 5.76 percent below the current market price. Khouw explained that in case the market declines, investors can either sell the put or create a put spread.