Hedge Your Stock Market Bets

Investors should buy put options on the Standard & Poor’s 500 Index because the benchmark for U.S. stocks may fall back to the 11-year low it reached in November, Goldman Sachs Group Inc. said.

“Dismal” fourth-quarter profits and forecasts from companies as well as waning investor confidence in President Barack Obama’s economic stimulus plan may drive the S&P 500 toward 752.44 in the next month, Goldman strategists said.

For investors using a “put spread” strategy, the highest payoff would be generated through buying March 825 puts and selling March 745 puts, Krag “Buzz” Gregory and John Marshall wrote in a report distributed to clients today. That trade would produce $1.85 in profit for every $1 invested should the S&P 500 drop to its November low, they said. The index slumped a third day, losing 0.1 percent to 825.44 today.