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3 Covered Calls to Guard Against the Impending Drop

Use covered calls to hedge against a market correction, large or small

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If you subscribe to the Shiller price-earnings ratio, then the associated graph should sound alarm bells. According to the graph, stocks are the most expensive in history, save right before the stock market crash of 1929 and the dot-com bubble.

3 Covered Calls to Guard Against the Impending Drop
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If you have a long-term diversified investment strategy, like my forthcoming stock advisory newsletter The Liberty Portfolio, then the relative valuation of the market doesn’t matter very much. Stocks rise over the long term.

However, some of you may like the idea of hedging your portfolio if things are pricey overall. You can do this by using covered calls. By selling covered calls against various securities, you can provide yourself some downside protection without selling out of your position, which might trigger capital gains taxes. You give up some potential upside, although you can always buy back the security or the covered calls.

Here are some covered calls you might sell if you hold any of these popular exchange-traded funds.

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