If Alex has a portfolio of blue-chip stocks valued at $500,000 and seeks to hedge, what should he buy?

Buying SPX puts would effectively serve as a hedge for Alex's portfolio of blue-chip stocks. SPX options are options based on the S&P 500 Index, which represents a broad market exposure and includes many companies, potentially including those in Alex's blue-chip portfolio. By purchasing put options on the S&P 500, Alex could protect his portfolio from market declines. If the market drops, the value of the SPX puts would likely increase, offsetting some or all of the losses in his blue-chip stock portfolio.

In contrast, call options on blue-chip stocks would be a bullish strategy and wouldn’t provide the hedging protection Alex seeks. Equity ETFs, while they could diversify his investments, don’t directly hedge against potential losses. Fixed-income securities, while typically more stable, do not correlate closely enough with his equity holdings to act as a hedge against market downturns related to blue-chip stocks. Therefore, purchasing SPX puts is the most effective strategy for hedging against potential declines in Alex's stock portfolio.