Major indices finish lower amid GE earnings disappointment >>> READ MORE

Hedge These 3 Blue Chips With Covered Calls

LEAP covered calls can hedge an overbought market

    View All  

It’s up for debate whether the soaring stock market is being driven by artificial demand, as bond buyers have been redeploying capital since rates are so low, or if earnings justify the move in both the market and individual stocks.

Source: Flickr

Regardless, there are plenty of pundits who think the market has gone too far and is overdue for a serious correction.

So, what should you do if you have concerns?

One possible strategy that might help you sleep at night is to hedge some of your positions using covered calls. In this case, I’m talking about using LEAPS on blue chips, which will yield substantial premiums that will both hedge against a down move in the market, and not leave you too unhappy if your position gets called away.

Still, I suggest you sell calls against half your position, allowing you to collect premiums on some of your blue chips, while still not risking the rest being called away.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC