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The big news today is that the Federal Open Market Committee (FOMC) will issue its latest monetary policy decision this afternoon at 2 p.m. ET, and the market is widely expecting the committee to raise the federal funds target rate by 25 basis points to a range of 1%-1.25%.

Within the current environment, it could take an extended period of time before any further selling materializes, but I believe the rate hike would be an overall negative development for the market in general.

That being the case, let’s put on some “portfolio insurance” just in case — in the form of a bearish July position on SPDR S&P 500 ETF Trust (NYSEARCA:SPY).

Using a spread order, buy to open 1 SPY July 21st $240 put and sell to open 2 SPY July 21st $225 puts for a net debit of about $0.85.

Note: There are several July expirations available for SPY options. Be sure you are opening the monthly options that expire on Friday, July 21, 2017.

Ratio debit spreads like this one are simply a way to lower the cost of buying options, as the two option(s) that you sell to open (short) helps offset the cost of the option that you buy to open. Therefore, this ratio put debit spread is a way to lower the cost of establishing a bearish put option trade. Many brokers will require the use of margin and/or a set amount of reserved capital and/or a margin account to execute a debit spread; contact your broker directly for specific requirements.

Because you are short a naked put in this ratio put debit spread, the risk is that you could be obligated to buy 100 shares of SPY at the $225 strike price for every 1 contract that you are short of the SPY July 21st $225 puts. So, you’ll want to exit if SPY gets down to $225.

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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.