A 'tail hedge' trade that profits if this week's CPI is very hot and another one for a benign reading

JPMorgan looked at two derivatives ideas with limited risk going into Wednesday's key inflation reading.

Wednesday's key inflation reading could stir up volatility again in a stock market that just experienced shockingly wild swings, and JPMorgan strategists are advising clients on options trades for protection against any surprises in the economic data. On Monday, stocks struggled ahead of this week's inflation data, which will likely set the tone for short term market action.

Buying a put option against the S & P 500 is a strategy that gives the buyer the right to sell the broader market at a predetermined price by a specific date. The value of the put contracts will increase if the S & P 500 falls on a surprising resurgence of inflation. Investors are hoping that inflation will continue to ease, setting the stage for the Federal Reserve to cut rates especially amid concerns about a weakening jobs market.

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