President-elect Donald Trump has selected Robert F. Kennedy Jr. to head the Department of Health and Human Services, the nation's highest health agency. This cabinet reshuffle caused anxiety among various health care stocks. I am looking to use options on the Healthcare Select Sector SPDR ETF (XLV) to find a way to hedge my healthcare exposure and also take advantage of further potential downside in the lagging healthcare sector. Masu. XLV SPY YTD Mountain Healthcare Select SPDR and SPDR S&P 500 Trust YTD Despite mixed performance of XLV's top three stocks (representing nearly 30% of XLV) Eli Lily, UnitedHealthcare, and Johnson & Johnson is a name I still like and own. However, I would like to avoid this risk as there is still continued uncertainty surrounding the 'formation' of policy. Investors will want to better understand what types of companies are likely to be targeted by RFK. The trade in which I would like to purchase a put spread is to express my short-term bearish view on healthcare. In this trade, we bought a higher priced (more expensive) put and sold a lower priced (cheaper) strike to offset the overall cost of this debit spread. Buy XLV $143 24/12/20/24 Sold put option for $2.00 XLV $136 12/20/24 Sold put option for $0.50 This spread costs the investor $1.50 or $150 per lot. When this spread was purchased, XLV was trading at approximately $143. Disclosure: (long) LLY, UNH, JNJ, this has been prevalent in XLV for a long time. ) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and do not necessarily reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliates, and are It may have been previously disseminated in other media. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice, or a recommendation to purchase any security or other financial asset. The Content is general in nature and does not reflect any individual's unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
