The financial markets have an upside bias, which is reflected in the upward trend of major stock market indexes. Many people do not understand that stocks, ETFs, bonds and commodities are also susceptible to major price corrections; especially during bear markets defined by declines of 20% or more. The prudent portfolio owner must always prepare their holdings for a material market correction.

One way to monitor and protect a portfolio is to use derivative products, such as options. Options are an effective tool to monitor and protect a portfolio. Options can provide protection against cyclical market events such as interest rate changes, economic trends and geo-political events.

The overwhelming majority of retail investors are strictly “long” investors. Those investors only own stocks with the prospect that over time, they will rise in value. The financial markets never “ring a bell” at market tops. Most often investors shrug off small drawdowns flippantly thinking they will go back up. And most of the time, they do.