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With the market hitting all-time highs last week— albeit in tiny, incremental steps — it’s easy to get caught up in the upward momentum. But prudent traders know that protecting against the downside is just as critical, especially with major economic events on the horizon. Enter the bear put spread — a cost-effective hedging strategy that can offset risks while keeping overall exposure manageable. Here’s a real-world example of a recent trade I set up on the S&P 500 ETF SPY. With implied volatility rank very low last week — signaling that premiums are inexpensive — it was an ideal time to build a hedge. I chose a bear put spread targeting the Dec. 31 expiration, buying the $608 put while selling the $590 put. The debit for this trade was $4.25 per contract, creating a max risk of $425 per contract. Now let’s talk about potential rewards. If SPY drops below $590 by expiration, this trade has a maximum profit of $1,800 per contract. That’s a 347% return on risk. Even if the market doesn’t make such a dramatic move, incremental gains are still possible. For example, a move to $600 could yield around $800 per contract — nearly a 200% gain. The beauty of this setup lies in its asymmetry. I’m risking just a small fraction of my account to hedge against broader market downside over the next few weeks. If the market continues its melt-up, I lose the small debit amount. But if we see a pullback — whether driven by next week’s rate decisions, inflation data or some unexpected event — this hedge has the potential to deliver substantial returns. Why now? Timing is key, and last week’s low IV made this an opportune moment to buy premium. When volatility spikes — as it did in July and August — options become more expensive, eating into potential profits. By entering during a period of low IV, I’m positioning myself to benefit from any future volatility increase without overpaying for the trade. It’s important to remember that hedging isn’t about calling the top or predicting the next crash. It’s about protecting your portfolio from downside risks while maintaining the ability to participate in market gains. This type of strategy is especially relevant with rate decisions and key inflation data coming up (Wednesday and Thursday of this week). While the market may continue its upward drift, the risk of a 1% to 3% correction is always there. A well-placed hedge like this can provide peace of mind and a potential profit if the market decides to take a breather. For traders focused on long-term success, it’s not just about capturing gains — it’s about staying prepared for whatever the market throws at you. The bear put spread is one tool that does just that. I’ll see you in the markets. Chris Pulver Chris Pulver Trading Follow along and join the conversation for real-time analysis, trade ideas, market insights and more! Telegram: https://t.me/+av20QmeKC5VjOTc5 *This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk. The Fed has been trying to keep the economy afloat. From the numbers they're looking at, they think the progress they’ve had has stalled. If you think things are bad now, how do you think the economy will be when this "progress" stalls? We're walking right into an even worse inflation and until someone cleans this whole mess from top to bottom, it won't get any better. Your only option? Start increasing your income. If you increase how much you earn, you could stay relatively immune to a rising cost of living. The good news is that I might have just figured out how regular people can do just that. How does targeting income from the stock market with just one trade per week sound? You place the trade every Monday by 11:59 a.m. ET, and then close it on Friday. It's that straightforward. I’ll be live at 1 p.m. ET today with former market maker Jack Carter to show everyone exactly how it’s done. Of course, there are no guarantees on profits or losses in trading, but this might just be what could help turn the tables for regular folks. Want to get a link to TradingPub content, trade ideas, real-time market analysis and educational tidbits? We have you covered! Telegram is an entirely free messaging app and getting access is as easy as 1… 2… 3… 1. Download Telegram on your mobile device (Before you can add Telegram to your desktop computer, you must download the application on your phone and create your account: To download to your iPhone, click here. To download to your Android device, click here. After the download is complete, please create an account. NOTE: You can manage your privacy settings by clicking “Settings,” and then “Privacy & Security.” 2. Download Telegram on your desktop: Once you’ve downloaded Telegram onto your mobile device and created your personal account, you can download it onto your desktop computer. To download onto your PC, click here. To download onto your MacOS, click here. 3. Then add our channels by clicking these links!
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