I don't think that's right. Given that the Trump reflation/aggressive Fed trade is done mostly through downside in various LIBOR products, the mkt is actually quite long LIBOR/OIS spread at the moment (this is also due to large longs in swapspreads). IMHO, LIBOR/OIS isn't going to be a good hedge at the moment. If anything, you can observe the opposite, as the some of the pain recently came from an unexpected tightening of various bases (quarter end was a total damp squib). In Europe you could argue that BOR/EONIA basis is too tight, but it does nothing but tighten further as there is too much excess liquidity.
Easiest way is to trade a strategy uncorrelated to SPY. Stat arbs tend to trade for wild prices during high vol events (like a large market selloff ). You'd effectively be long vol trading such strategies. The key is to be efficient even when vol is not very high.
Weren't you just a few months ago on the runaway inflation thesis that Trump was leading us to. You seemed to be quite confident in your steepener trades (they since got crushed). You were quite confident that banks stocks were going to keep ripping (they have pulled back a lot) even pointing out how you were not long enough in your regional banking ETF. You were telling me how Goldman was going to the moon. Marty, the reflation trade is gone. Yes, obviously this has affected LIBOR/OIS spreads but now you are telling me if this market were to crash, credit spreads are "NOT" going to blow out? I'm all ears Marty....enlighten me.
And to further clarify Marty, the question was asked, what is the BEST most COST effective way to get this downside exposure. Why don't you also chime in then on what you feel that is. I'm genuinely interested. I stand by my argument that credit spreads are still the most cost effective way vs the alternative choices presented in this thread. I'm willing to change my mind. I'm still trying to grapple with your "massive inflation is coming to the US thread". I don't think ten year treasuries agree with you for now. Markets are always changing though...
The equivalent exchange-traded products like Eurodollars over Fed Funds (an analogue of LIBOR/OIS) or TED spread (Two Year futures over Eurodollars, equivalent to short dated swap spreads).
You'd have to remind me, Mav, where I suggested that massive inflation is coming to the US... As to credit spreads, obviously, LIBOR/OIS has a credit component, but at the moment basis dominated by other things. If you want downside protection, unfortunately I can't think of anything better than otm puts etc in Russell or, failing that, Spooz.