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2 Pair Trades to Protect Your Portfolio

Stocks in this article: IBM HPQ LEN TOL

MINNEAPOLIS ( Stockpickr) --Why does Charlie Brown always try to kick the ball? He knows darn well that Lucy will never let him touch the pigskin and yet he keeps coming back for more. Investors are very much like Charlie Brown.

Five straight days of gains will quickly erase the memory of pain and losses. Oops, not so fast. This schizophrenic market of ours will pull that football away faster than Lucy. Over the past week, stocks once again reversed course. The gods of the market decided another retest of the lows was in order.

All it took was a Federal Reserve pronouncement that the economy faced significant risks, and down we went. The Dow lost some 700 points in two days of trading. That action is not exactly a sign of stability. No amount of "twisting" by central bankers can change the fact that we are facing some serious issues here.

  Related: 5 Downgraded Stocks That Should Be Buys

As an optimist, I rarely get rattled, but I have to say the current situation is a bit disconcerting. I've seen my fair share of market and economic crisis. I am old enough to recall the pain of the oil embargo, stagflation and the decline of the rust belt. Through it all, one thing was always present: hope for the future.

Right now the country is lacking hope. Until hope returns, investors can expect markets to writhe. There will be days we go up, and there will be days we go down. Such an environment is not conducive to making profits - unless, of course, you are following an absolute return strategy.

Placing bets on the long and the short side of the market can help you navigate these hopeless trading days. A well-executed pair trade can not only protect your portfolio, but you can make money doing so.

Here are two pair trades to protect your portfolio.

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