Joe Tigay's Option Strategy For SPDR S&P Dividend (ETF)

With the fears of Greece debt crisis and Chinese equity meltdown gripping the markets, investors are shying away from investing in the current scenario. However, Equity Armor Investments' Joe Tigay has an option trade on SPDR S&P Dividend (ETF)SDY that suits such investors perfectly.

Tigay was on Bloomberg TV recently to share his trade and his outlook for the VIX.

Reasoning Behind The Trade

"This is just, a lot of people are telling me they want to invest in the market right now," Tigay said. "But they are obviously very concerned with everything that's going on or they are telling me, 'I sold [out] in the market a week ago, what should I do?'. And this is not a trade to put trading dollars."

"This is an investment for people to instead of buying into the market right here, they could instead sell a put going forward and they'll be participating in the market in that way. So, is they are saying 'I'll love to buy the market if it pulls back', they'll effectively be doing that with this trade."

The Trade

He continued, "So, my trade is to sell the August 200 put in the SPY. We are currently trading about 206.5. So, there will be about a 3 percent decline where you would not lose any money on the downside and you will still be able to participate in the market."

VIX

On his outlook for the volatility index, Tigay said, "This is an elevated level. This is an area where the VIX usually doesn't remain in this area. The VIX has a mean reversion tendency, meaning if its ever very low it tends to go higher, if its ever very high it tends to go lower. Now of course we are all waiting on potential news coming out later this weekend and that obviously will be a catalyst to drive the volatility lower or higher depending on the outcome for sure."