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Protect Your Gains: 3 Low-Cost Insurance Tactics for a Market Sell-Off
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Published in Stocks and Investing on Thursday, December 4th 2025 at 11:14 GMT by 24/7 Wall St- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Article Summary – “If You Think a Sell‑Off Is Near, Grab Some Insurance with These 3 Stocks”
Source: 247WallStreet, December 4 , 2025
The piece opens with a candid reminder that markets rarely stay predictable. Recent swings—from the 2024 earnings season through the June‑July Treasury‑rate surge—have left many investors wondering whether a sharp downturn is imminent. Rather than panic or wait for a “perfect” entry point, the author suggests a pragmatic approach: “insurance.” In investment parlance, insurance is a strategy that limits downside risk while still allowing a portfolio to participate in upside.
The author’s thesis rests on three key concepts:
- Diversify risk protection across multiple instruments
- Keep costs reasonable
- Choose liquid, widely understood securities
To that end, the article recommends three “insurance” vehicles that can be bought in a single trade or a short, low‑cost spread:
| # | Asset | Why It Works | How to Buy |
|---|---|---|---|
| 1 | SPDR S&P 500 ETF Trust (SPY) – Put options | Puts on SPY provide a direct hedge against a broad‑market fall. The SPY option market is the most liquid, offering tight spreads and a variety of strikes. | Buy a 1‑month or 3‑month SPY put at a strike that is 5–10 % below the current price (e.g., a $380 put when SPY trades at $400). Use a “calendar spread” to reduce cost: short a longer‑dated put at a higher strike while long a shorter‑dated put at the same strike. |
| 2 | ProShares Short VIX Short‑Term Futures ETF (SVXY) | SVXY tracks the inverse of the VIX short‑term futures index. When volatility spikes, SVXY goes down, which is the opposite of what happens when the S&P 500 drops. It therefore functions as a “volatility hedge.” | Buy 1‑month SVXY futures or a one‑month SVXY ETF. The author notes that SVXY can be highly volatile and should be used as a short‑term “stop‑loss” or a supplemental hedge. |
| 3 | iShares 1‑3 Year Treasury Bond ETF (SHY) | Cash‑equivalent Treasury bonds provide a safe haven during equity sell‑offs. SHY’s short duration keeps it insulated from long‑term rate risk while offering a small, steady yield. | Hold SHY on a “cash‑plus‑bond” strategy: keep 10–15 % of the portfolio in SHY. The article recommends buying a few hundred shares and rebalancing monthly. |
The author emphasizes that cost control is essential. Using options, the main expense is the premium paid for the put. By constructing a calendar spread (shorting a distant‑dated put while holding a nearer‑dated put of the same strike), investors can offset a portion of the cost. For instance, if the $380 SPY put costs $4.50, the $380 $180‑dated put may cost $2.10, leaving a net debit of $2.40—significantly cheaper than outright buying the put.
The article also cautions against over‑hedging. A 100 % hedge (e.g., buying a put for every dollar invested) would wipe out all upside. The suggested approach aims for a 50 % hedge: for every $100 in equity, buy $50 of protective puts and keep $10–15 % in SHY. The remaining $35–40 can remain in the core portfolio.
Risk‑to‑Reward Trade‑Offs
SPY puts:
Pros: Direct equity protection, highly liquid.
Cons: Expiration risk; if the sell‑off is delayed, the premium may decay.SVXY:
Pros: Inverse volatility; can offset a rapid market plunge.
Cons: Counter‑intuitive behavior; can lose value if volatility falls (e.g., in a mild downturn).SHY:
Pros: Low credit risk, stable yield.
Cons: Low absolute return; may lag when equities rally.
The article concludes with a scenario analysis. In a 20 % market decline, the combined hedge (SPY puts + SVXY + SHY) would cap losses at roughly 12 % for the portion of the portfolio that is hedged, while still allowing the remaining 88 % to benefit from any upside. In a mild 5 % decline, the hedging cost (premiums and short‑term bond spread) would offset most of the loss, turning the trade into a “win‑win” scenario.
Author and Context
The article is penned by seasoned equity researcher David S. Thompson (currently a senior analyst at Wall Street Insights). He references several of his earlier pieces, such as “Protecting Your Portfolio from a Market Shock” (247WallStreet, July 2024) and “Volatility ETFs: Hedge or Gamble?” (WallStreet Journal, March 2025). The author also links to a Bloomberg chart showing the historical correlation between SPY puts and equity market turns, reinforcing the narrative that options can act as an effective safety net.
Take‑away
- Use a calendar‑spread on SPY puts to get downside protection at a reduced cost.
- Add a short‑duration Treasury ETF (SHY) for liquidity and a cash‑equivalent buffer.
- Consider a volatility inverse ETF (SVXY) for rapid market sell‑offs, but use it sparingly due to its counter‑intuitive behavior.
The piece positions these three instruments as a low‑cost, low‑maintenance insurance suite that can be implemented by the average retail investor. It invites readers to “protect” their gains without surrendering the growth potential that fuels their long‑term wealth.
Read the Full 24/7 Wall St Article at:
[ https://247wallst.com/investing/2025/12/04/if-you-think-a-selloff-is-near-grab-some-insurance-with-these-3-stocks/ ]
