A recent sketch on Saturday Night Live parodied the financial crisis by featuring comedian Kenan Thompson as an economist who simply pleaded "fix it!" Given that many investment portfolios are down 40 percent or more since late 2007, everyone shares Thompson’s sense of urgency. Investors have moved to the sidelines, hoping that time may heal damaged positions. However, in this market environment, investors need to do more than just wait for portfolios to recover.

Options let investors create unique positions that they can’t duplicate with stock or futures contracts. One way to fix ailing positions is to add options backspreads by buying lower-strike calls and selling twice as many higher-strike ones. These spreads typically don’t cost anything to execute, lower a position’s downside breakeven price, and recoup losses even if the market rallies modestly.