How to Protect Yourself Against Market Turbulence

Has recent market volatility got you thinkingit’s time to suit up for a possible downturn? Judging from the prevailing buzzaround markets of late, it seems like self-protection and hedging are on manyinvestors’ minds nowadays.

If you’re finding yourself nodding inagreement, check out this The Wall Street Journal article, Be Ready for the Next Investing Crisis. Focusing on four main factors that might topple the broadermarkets – China, tech stocks, the Federal Reserve and bond activity – thearticle gathers useful pointers for mitigating, countering and in some casesprofiting from these factors if markets do take a more serious tumble. Ofcourse, the usual caveats apply: make sure you’ve done your own research andunderstand well any investment strategy before you commit any money. But ifyou’re seeking some fresh insights, this article offers plenty of good food forthought and concrete tactics you might research further. Plus here are a fewfree TradeKing educational resources to help you extend on the strategiesoutlined in this article.

If buying puts interests you as a potentialhedging strategy, you’ll want to review Brian Overby’s blog series Put Options Explained. He explains whatputs are and the most common ways traders put them to use: to protect profitson an existing position and as an alternative to short-selling. He alsoexplains cash-secured put selling as a means of earning income above and beyondany dividends paid by stocks. This video BuyingProtective Puts focuses on thatstrategy specifically, including potential risks and rewards.

The Journal article mentions volatilityand the VIX, nicknamed the “fear index” as it gauges market sentiment –particularly uncertainty – among investors at a given point in time. To learnmore about the VIX, beginners can check out Brian’s post What’s the VIX – and Why Does It Matter to Traders?

Brian has also blogged a lot about volatility:everything from the kinds of volatility in the options marketplace, and howtraders can better understand and profit from measuring volatility, to advancedoptions strategies specifically geared for unusually volatile marketconditions. This roundup of market volatility posts should give you plenty of opportunities to learn and grow as aninvestor.

What’s your take on the turbulent marketslately? Have you switched up your trading patterns to adjust to a new, bumpierfuture?

Be Good,

Don Montanaro

CEO, TradeKing Group

Follow Don on Twitter and hone your skills at TradeKing All-Stars. You can also followTradeKing on Twitter, Facebook, Google+ or YouTube.

[image: Knights by Brad on Flickr]

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