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Over a longer-term time horizon, the “debt bomb” is still a huge problem.

Looking at the amount of debt throughout the whole world, it’s equal to approximately 225% of the world’s GDP. That is extremely high, and it’s simply unsustainable. When the debt bomb goes off and everyone is forced to deleverage all at once, economies around the world are going to find themselves in dire straits. In my opinion, the thing that will eventually set it off is a jump in interest rates.

Near-term, the one indicator that I always like to watch very carefully is the S&P 500 Volatility Index (INDEXCBOE:VIX), which fell back below 11 last week to its lowest point since January. While that’s generally considered to be a bullish sign, from a contrarian standpoint, seeing the VIX at those extremely low levels told me that complacency was creeping into the market once again.

So, with the VIX moving higher again on Friday, I see this as the right time to put on some “downside insurance” in the form of a bearish position on SPDR S&P 500 ETF Trust (NYSEARCA:SPY):

Using a spread order, buy to open the SPY Sept. 17th $280 put and sell to open the SPY Sept. 17th $270 put for a net debit of about $1.30.

Note: There are several September expirations available for SPY options. Be sure you are opening the options that expire on Monday, Sept. 17, 2018.

For those who may be new to this debit-spread strategy, this is simply a way to lower the cost of buying options, as the option that you sell to open (short) helps offset the cost of the option that you buy to open. Therefore, this put debit spread is a way to lower the cost of buying bearish put options. Many brokers will require the use of margin and/or a set amount of reserved capital to execute a debit spread; contact your broker directly for specific requirements.

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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.