Insure your stocks against a crash

  @FortuneMagazine July 8, 2013: 7:09 AM ET
WEA22 insure stocks
(Fortune)

The bull market in stocks that began in March 2009 has been mighty indeed. From its low point, the S&P 500 index has more than doubled, recently hitting record highs. But the market's pullback in mid-June has left many investors scrambling for ways to shield their portfolios in the event of a complete meltdown. (For more on why stocks may be going lower, see The party could be over for stocks.) To address this angst, financial firms are aggressively marketing "principal-protected" products, designed to shield investors from losses while allowing them to keep some (although usually not all) gains. But those products are notoriously complicated, are generally expensive, and often require investors to tie up their money for years or else face stiff withdrawal penalties.

For a simpler form of crash insurance, consider instead purchasing so-called protective put options for your portfolio. Put options give an investor the right to sell a stock at a preset price up to a specific date in the future -- effectively putting a floor on potential losses.

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Index Last Change % Change
Dow 16,424.85 162.29 1.00%
Nasdaq 4,086.23 52.07 1.29%
S&P 500 1,862.31 19.33 1.05%
Treasuries 2.64 0.01 0.34%
Data as of 7:36pm ET
Company Price Change % Change
Bank of America Corp... 16.13 -0.26 -1.59%
Facebook Inc 59.72 0.63 1.07%
Yahoo! Inc 36.35 2.14 6.26%
Intel Corp 26.93 0.16 0.60%
Alcoa Inc 13.42 0.37 2.84%
Data as of 4:02pm ET
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15 yr fixed3.33%3.31%
5/1 ARM3.34%3.55%
30 yr refi4.39%4.41%
15 yr refi3.31%3.30%
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