How to Protect Yourself from Today's Stock Market Crash

Today's Stock Market Crash: The Dow Jones Industrial Average plummeted more than 1,000 points, or 6%, in early trading today (Monday) as the rout in global stocks deepened. Traders around the world have coined today "Black Monday."

The S&P 500 dropped as much as 120 points, while the Nasdaq dipped 393 points at today's low.

stock market crashToday's massive drops in U.S. markets were prompted by a stock market crash in China. The Shanghai Composite cratered more than 8.5% on Monday. With the drop, China's stock market is now in the red for 2015.

Worries about slowing economic growth in the world's second-largest economy have caused the Shanghai Stock Exchange to fall more than 37% in just two months.

European stocks are not faring any better today. The Stoxx Europe 600 fell 6.9%, while Germany's DAX dipped 4%. The UK FTSE fell 4.4% and hit its lowest mark since January 2013.

Japan's Nikkei index was down 4.6% today.

But it's not just China's economic woes that are pushing markets lower. The U.S. Federal Reserve's plan to raise interest rates, the continually falling price of oil, and the economic woes of Greece and Japan are all weighing on global stocks...

"There's just no good news left to lift stocks higher," Money Morning Capital Wave Strategist Shah Gilani said today. "There's no market leadership from any industry, other than the brief momentum runs made by some tech darlings and a bunch of hot biotech companies promising next-century solutions... to yesterday's problems."

While most investors are panicking, there are several steps you can take to protect yourself from today's stock market crash...

How to Invest During Today's Stock Market Crash

"What the markets need is a good, long flushing-out. Not that I want to see that, even though we are short, but that's what they need to squeeze out excesses built into artificially inflated equity prices and bond prices," Gilani said.

"It's not too late to take profits, if you still have them," he continued. "And it's not too late to hedge against further downside moves, or to make money if stocks have a lot further down to go, which I think they do."

But because put options are so expensive right now, Gilani recommends investing in inverse exchange-traded funds (ETFs). They provide great exposure to stock indexes and will profit when the markets are crashing.

Some of his top buys are:

  • ProShares Short Dow30 (NYSE Arca: DOG), an inverse ETF that correlates to the Dow Jones Industrial Average. It's up 8.4% in the last month.
  • ProShares Short QQQ (ETF) (NYSE Arca: PSQ), an inverse-ETF that tracks the performance of the Nasdaq 100 Index. It has climbed more than 11% in just the last five trading sessions.

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