I have an IWM annuity situation that I'd like to hedge. My cost basis is $149 and the IWM's current price is $166. If IWM is above $149 on 1/31/20, I get 8+ pct ($149.01 or higher). This comes with 10% of downside protection so I wouldn't lose a penny unless IWM drops below $134.10. If only looking at the profit portion of this position, it resembles a binary option. Either I get an 8% gain or I don't. I'm looking for some alternative ideas for hedging this position using the nearest expiration ater the P&L date. That would be Feb 7th. The obvious answers are: 1) Buy ATM puts. The Feb 7th $165 put is $1.80 but AFAIC, $1.80 per 100 shares is a lot to waste for 3 weeks. It amounts to giving up 1.2% of the yield. However, if IWM cracked and I lost the annuity profit, I'd have a slightly better 9.5% profit from the protective puts(165 - 149 - 1.80)/149. 2) I could put on bearish put verticals but given that expiration is fairly close and the short strike is 10+ pct away, the credit for the short leg won't do much to reduce cost. For example, the Feb 7th $160/150p vertical would cost about 50 cents, locking in about a 6.4% gain (160 - 150 - 0.50)/149. Not great but better than nothing. Other than the binary component of the above, this can be duplicated with DIY options. But that's another story. Apart from my (1) and (2), does anyone have any clever suggestions on how to protect my current 8+ pct gain at a lower cost? TIA.