Buy industrial, material, tech ETF puts: Goldman

Investors should buy put options on exchange-traded funds tracking the industrial, raw-material and technology industries as protection from the slowing U.S. economy, strategists at Goldman, Sachs & Co. said.

"The probability of an early 2008 economic slowdown has increased significantly as economic data has weakened over the past month,'' Maria Grant and John Marshall wrote in a research note, citing the unexpected loss of American jobs last month.

Puts on those ETFs ''provide the best potential payouts across sectors if there is a sharp downgrade to U.S. growth expectations,'' they added.

The contracts give investors the right to sell shares by a certain date and for a set amount, called the strike price. Buyers may earn more than $4 for every $1 invested in so-called at-the-money contracts "" or puts with strike prices near the current price of the ETFs "" expiring in three months, according to Grant and Marshall.

They recommended three Select Sector SPDRs. The industrial SPDR retreated 0.1 percent to $39.06 yesterday. The material ETF gained 0.6 percent to $39.10, while the technology security slumped 0.3 percent to $26.

Grant and Marshall also advised buying at-the-money puts on the Semiconductor HOLDRs Trust, which declined 1.7 percent to $37.58 yesterday, and the Philadelphia Stock Exchange Gold & Silver Index, which advanced 0.2 percent to 155.75.

Puts on the Nasdaq-100 Index and Russell 2000 Index, as well as Brazil's Bovespa Index, offer the best hedges among global indexes against a U.S. slowdown, the Goldman strategists wrote. Employers cut 4,000 workers in August, the first loss since 2003, according to the U.S. Labor Department on September 7.

Economists expected an increase of 100,000, the median estimate in a Bloomberg survey.