I bought some S&P 500 futures betting on a higher U.S. stock market for December. We have lower interest rates, a cheap dollar and U.S. companies at the cheapest forward price earnings ration in years. What's not to like? Do I have a stop on my position? You bet! I don't want to take a pullback of more than 1% on this market.
My hedge? I bought some puts on the Emerging Markets Index ETF (EEM – $159.44). My thought process is that only a global meltdown could hurt my position. The U.S. is poised to outpeform in December.
Disclosure: While I am long 160 strike puts on EEM, I am also short some 100 strike puts.
Extra Disclaimer: Futures and options are highly leveraged instruments. Do no use them unless you can afford to lose your entire initial investment and then some extra on top of that. Do not play with matches around gasoline either.