Our SPX Hedge Paid. Now Is It Time to Sell the Fear?
The SPX hedge below 7,700 paid as the index closed Friday at 7,659, 2.4% below its record. With fear back in option prices, a bull put spread example: sell the 7,550 put, buy the 7,500 put, about 10 points of credit, breakeven near 7,540 and a 4:1 risk against reward.
Educational example. It explains how a structure works; it is not a trade report and not a recommendation. Premiums are illustrative. Levels are as of the close on Friday 16 October 2026.
The last idea: a hedge below 7,700
On 9 October we looked at a bear put spread on SPX: buy the 7,700 put, sell the 7,600 put, expiring 16 October, for about 25 points. On Friday 16 October SPX closed at 7,659.44. At that level the spread was worth 7,700 − 7,659.44 = 40.56 points, about 15.6 points (≈ $1,556) more than it cost. It was not the maximum of about $7,500, but the hedge did its job: it paid when the market fell.
Where SPX stands
SPX closed Friday about 2.4 % below its record (an intraday high of about 7,844 on 6 October). Fear is back:
- AI-debt worries hit technology stocks.
- Brent crude settled near $110.
- Earnings: Netflix and Tesla this week.
On the chart, the 7,550–7,600 zone is the support to watch.
The structure: a bull put spread
After a selloff, fear makes put premiums expensive. A bull put spread sells that fear, with the loss capped.
| Leg | Option | Role |
|---|---|---|
| Sell | 7,550 put | collects premium, below support |
| Buy | 7,500 put | protection: caps the loss |
Expiry: Friday 23 October 2026. SPX options: 1 point = $100.
The numbers, worked out
- Credit received: about 10 points = $1,000.
- Maximum profit: the credit, ≈ $1,000, if SPX stays above 7,550 at expiry.
- Width: 7,550 − 7,500 = 50 points = $5,000.
- Maximum loss: 50 − 10 = 40 points = ≈ $4,000, if SPX is below 7,500 at expiry.
- Breakeven: 7,550 − 10 = ≈ 7,540, about 1.6 % below Friday's close.
- Risk against reward: $4,000 ÷ $1,000 = 4 : 1 against you.
What to watch
- Netflix and Tesla earnings, and AI / tech sentiment.
- Oil and the 10-year Treasury yield.
- The Fed blackout ahead of the 28 October decision: no Fed speakers to calm or shake the market.
The risk
The structure wins often and small, and loses rarely and large. Selloffs can keep going, and selling puts into a falling market is how you "catch a knife". Size small and decide in advance where you would close it.
| Spread | sell 7,550 put / buy 7,500 put |
| Expiry | Fri 23 Oct 2026 |
| Credit | ≈ 10 pts ($1,000) |
| Max loss | ≈ $4,000 |
| Breakeven | ≈ 7,540 |
Options involve significant risk of loss. Figures are an example with illustrative premiums; real prices, spreads and fees differ.