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Power Play: Market slide insurance

Traders work on the floor of the New York Stock Exchange.
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Traders work on the floor of the New York Stock Exchange.

For the past three years, investors have not seen much downside in the markets.

But if—and when—the slide comes, how do you protect your portfolio?

"Be bullish on options," said John Wilson, CEO and Co-CIO of Sprott Asset Management, with $7 billion under management.

"Think of it as like buying home insurance to protect during large declines in market value," Wilson said. "its great protection against downside volatility."

Wilson suggests buying put options as insurance against the Russell 2000, S&P 500 and Euro stoxx 50.

"We especially like the SPDR EURO STOXX 50 ETF This is a great way to enhance the upside with limited risk," adds Wilson.

Wilson explains "If the market goes down, the value of the options offsets some of the decline; if the market goes up, the portfolio can participate in the upside unrestricted."