What is the story about?
What's Happening?
The stock market continues to rally to record highs, with the S&P 500 adding 0.6% and the Nasdaq Composite jumping 1.1% on Wednesday. Despite the momentum, KKM Financial CEO Jeff Kilburg advises traders to use options to protect their positions from potential downturns. Kilburg suggests purchasing puts due to low volatility, making options premiums inexpensive. He sold Dec. 31 $700 calls on the SPDR S&P 500 ETF (SPY) and bought the Dec. 31 $640 put, anticipating the market won't rise another 5% before New Year's Eve.
Why It's Important?
The current market rally, described as a 'sugar rush,' presents opportunities and risks for investors. Kilburg's strategy of using options to hedge against potential market declines highlights the importance of risk management in volatile markets. As earnings season approaches, companies may adjust expectations, potentially impacting stock prices. Investors need to be prepared for shifts in market sentiment and volatility, which could affect their portfolios and investment strategies.
What's Next?
Earnings season is set to begin next week, which could influence market dynamics as companies release financial information. Kilburg notes that stocks may dip as investors digest new data, emphasizing the need for protective strategies. Traders should monitor corporate earnings reports and adjust their positions accordingly. The ongoing failure of U.S. lawmakers to pass a funding measure to reopen the federal government adds uncertainty to the market, potentially affecting investor confidence and economic stability.
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