For instance, if you’re options savvy, you could assemble a put-ratio spread of your own using similar strikes. That way, depending on how far and how fast the S&P 500 falls, you could be sitting on some potentially large windfall gains - while those who didn’t prepare for this contingency are forced to conduct financial triage on their investment portfolio.

Of course, if options spreads are not your cup of tea, you could simply buy a handful of cheap SPY put options, and hope the “lottery” pays off: After all, depending on how deep out of the money you go, your chances of winning would be about the same.

Or, you could buy a specialized “inverse fund,” such as the Rydex Inverse S&P 500 Strategy Fund (RYURX), which actually appreciates as the S&P 500 drops. If you prefer “high-test” investments, you could also opt for a double- or triple-leverage investments - such as the ProShares Ultra S&P 500 Exchange-Traded Fund (NYSE: SSO), or the ProShares UltraPro Short S&P 500 ETF (NYSE: SPXU).

But tread lightly. In an era where central bankers around the world continue to play “risk taker of last resort,” there are no guarantees that we’ll see the “normal” market behavior - the market behavior we would normally expect to see after such a torrid advance in a major bellwether index. Things could just as easily power up in a hurry if the markets - and the investors who comprise those markets - become more confident … regardless of the reasons why. In cases like that, these bets would turn into losers in a big way and in a big hurry.

Courtesy: Money Morning

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