It's time for investors to hedge their bets on tech stocks after a dramatic rally through the first half of the year, according to Goldman Sachs. Arun Prakash from Goldman's derivatives research team said in a note to clients on Tuesday that tech stocks look wobbly and could be due for a pullback. "Our analysis suggests that S & P Technology stocks have become unusually crowded relative to macro assets, and we see increased risk of downside asymmetry.
Put options give the holder the right to sell an asset at a pre-determined strike price, and a put option is out of the money when the strike price is below the asset's current market price. With put options, investors' downside risk is limited to the premium paid for the contract. The XLK has surged 41.8% year to date but has shown signs of slowing recently. The ETF is up just 1.5% in July. XLK YTD mountain The XLK is up more than 40% in 2023.
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