While working through the insider purchases from last week, I considered several companies as potential candidates for this week’s weekly focus article but came up short. The $1 million purchase by the Chairman of E*Trade (ETFC) was certainly interesting as was the $820,000 purchase by a director of The Cheesecake Factory (CAKE) but neither company felt like a screaming buy. This lack of a candidate combined with some business related travel last weekend is partially responsible for the delay in publishing the focus article this week.
We have in the past discussed hedging strategies to protect our portfolio through various strategies including the use of inverse index ETFs, put back spreads on overvalued momentum stocks as well as going long the volatility index. You can read our weekly focus article and special reports regarding hedging options here, here and here. While inverse index ETFs may provide ideal inverse correlation (they go up when the market goes down), the amount of protection offered during a sharp plunge may not be adequate unless you are using options.