JPMorgan advises hedging stock market risks in July-August

That's when tensions between the U.S. and China couldreach a boiling point, predicts JPMorgan.Recent deterioration in US-China relationsmay reach a boiling point in July-August, so investors should hedge the risks of a stock market decline during this period, JPMorgan strategists write. This can be done either by selling call options against a long position in stocks, or by buying put options and bear spreads.
This week, the bank's experts lowered the degree of their optimism on the US stock market, saying that the recent deterioration in relations between Washington and Beijing is a sign of the politicization of the Covid-19 pandemic.Thisconflict canto slow down the fragile economic recovery that has emerged against the backdrop of the world's gradual exit from quarantine.

“Given the above, we recommendtake advantage of increased implied volatility and sell three-month call options against a long position in stocks, ”writes the JPMorgan strategic team. “Strikes should be chosen 5% above the market.”

As for companies that receive from China 15% of revenue and more, here the bank advises directly to buy put options and bear spreads.