Temperatures Gain in German Stocks, Hedging Costs Rise
A financial trader monitors data on computer screens at the Frankfurt Stock Exchange in Frankfurt, Germany, on Monday, March 9, 2015. With the European Central Bank buying its first government bonds this week to shore up the region's economy, options traders are showing little concern that the DAX Index might decline.
Photographer: Martin LeisslThis article is for subscribers only.
The stimulus trade in German equities is crumbling and investors are bracing for the fallout to worsen.
The attached chart shows the cost to hedge against declines in the DAX Index is the highest since at least 2006 relative to the Standard & Poor’s 500 Index, according to three-month Bloomberg data on implied volatility.