August was an emotional roller coaster for investors. Some investors bravely took advantage of a brief buying opportunity after a historic volatility surge earlier in the month. As the S & P 500 now sits less than 1% away from its all-time high established in July, I anticipate a September slowdown and the SPDR S & P 500 ETF (SPY) to be range bound. Hedging at the current elevated level in the S & P 500 will mitigate downside risk while seeking to produce profits if history delivers another soft September. (Note this earlier CNBC Pro piece on weak Septembers.) SPY YTD mountain SPDR S & P 500 ETF, YTD Labor Day weekend signals that kids are back in school and that summer is officially over but, it also awakens investors’ paranoia as we slide into the fall. The Stock Trader’s Almanac reports that, on average, September is the month when the stock market’s three leading indexes usually perform the poorest. Yardeni Research also states that from 1928 through 2021, the S & P 500 index has averaged a 1% decline during the month of September. This gloomy historical data is in the background for investors as many global macro headwinds still sit center stage. In addition, markets will wait to judge the Federal Reserve’s “sense of urgency” with their critical meeting less than twenty days out. Market expectations are for the Fed to kick-off their interest rate cutting campaign. The trade I believe the Fed will stay on their conservative course of action with just a quarter-point interest rate cut and that prudence in itself may dampen some recent equity market euphoria. I want to utilize a risk reversal to capitalize on a potential pullback but, I also want to add another leg to this option spread (buying an upside call) to define the potential risk if markets decide to resume “melt-up mode”. To pay for this trade, I am aggressively selling SPY at its all-time high level of $565, not quite at-the-money but, pretty darn close. Sold the 9/20/2024 SPY $565 Call for $5.00 Bought the 9/20/2024 SPY $545 Put for $2.35 Bought the 9/20/2024 SPY $575 Call for $1.35 Collected $1.30 ($130) for each one lot SPY was roughly trading $561 when trade was executed DISCLOSURES: (Own this spread and long the SPY) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.