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Trade Truce Deadline Strategy: Now Is the Time to Buy Puts to Hedge Portfolio

As the broader market has surged to start 2019, retail investors have taken some risk off the table of late ahead of the March 1 trade truce deadline between the U.S. and China. That's according to TD Ameritrade Trading Strategy Manager Shawn Cruz. "A little bit of profit-taking" was heavily in the mix for some retail investors, said Cruz. The iShares PHLX Semiconductor ETF is up 17% year-to-date, for example. Many investors, have bought up chip stocks on speculation that the U.S. and China could reach an agreement in which China would resume buying more semiconductor equipment from U.S. - based chip makers, which include Nvidia Corp. , Advanced Micro Devices Inc. and Intel Corp. Intel Corp. . Cruz said clients rotated into defensive sectors like healthcare. On the trade sensitive stocks, retail investors took a "wait and see approach of what's going to happen with these trade talks." Looking forward, most do not expect trade relations to completely resolve soon, and there could be volatility ahead. "Now hedging costs are incredibly low, so if you do want to go out there and , say, buy puts to hedge your portfolio, the cost of hedging is incredibly cheap right now with the VIX volatility index at these low levels," Cruz said. Simply put, there hasn't been much volatility as stocks have risen, which means demand for puts have been low, making it cheap to buy those contracts now. See more about why Nvidia may be able to deliver on its guidance here. This video was originally published by TheStreet.

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