Chart of the Day: Don't Forget to Keep Some Market Protection
Adding short ETFs helps to insure some portfolio volatility remains muted.
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It is hard to have capital at risk in the markets without thinking about protection. There are various ways to protect a portfolio: buying puts or selling calls against stock are a couple, but we can also protect our gains by using inverse ETFs.
We have bought the ProShares Short S&P500 SH in the past and it served us well. The point for adding this protection is not necessarily to make a profit (though that is always nice), but rather to smooth out the volatility in the portfolio that arises when uncertainty is more likely than ever.
Make no mistake, during the Trump administration's first term from 2016-2020 there was plenty of uncertainty and wild market behavior ensued. We expect some of the same to occur over the next few years, which is why we recently added the SH.
The chart is clearly heading lower, no surprise when the market is in an uptrend. When this heats up, it means markets are getting bearish. Again, we are using this vehicle to blunt the volatility in the overall portfolio, hoping that exposure to the SH will limit losses when the market strikes down out of nowhere.
At the time of publication, TheStreet Pro Portfolio was long SH.
